Today’s opening theme is food, specifically bakery products. Despite the shift towards healthier eating habits, particularly post covid-19, there remains an enduring desire for treats that provide a small moment of indulgence. The latest deals are Wise Equity agreeing to buy a majority stake in an Italian bakery from Aksìa Group and Argos Wityu’s purchase of a majority stake in a German bakery chain from Odewald KMU.
Sticking with the consumer sector, I turn your attention to a listicle spotlighting recent deals in the music industry. Blackstone, KKR, Pophouse and HarbourView are among the PE firms involved in these deals.
Finally, I will highlight a report by Gain.pro that explores the private equity landscape in Europe in 2023.
Bread and bakery
Baked products have evolved into a household staple, thanks to their wide appeal across various consumer preferences. The segment has attracted investors due to its ability to respond to shifting consumer needs.
Wise Equity has agreed to acquire a majority stake in CRM, known as Casa della Piada, from Aksìa Group.
Modena-based Casa della Piada is an Italian company that provides bakery products such as piadine and tigelle for large-scale retailers. It is also present in all major Italian food retailers with its own brands Casa della Piada and Gastone. It projects a turnover of over €50 million in 2024.
Aksìa acquired Casa della Piada from the founding family in 2018. Aksìa’s development plan led the company to grow at an annual rate of 20 percent through expansion in Italy and abroad, the acquisition of Gastone, doubling the production capacity and the launch of a new marketing strategy and new products, according to a release.
This transaction is the third divestment by the Aksìa Capital IV fund.
“We have identified in Casa della Piada the characteristics that usually distinguish our investments: leading company in a niche market, with growth prospects and great potential for expansion abroad, also through acquisitions,” said Stefano Ghetti, senior partner at Wise Equity, in a statement.
Casa della Piada is the third investment made by Wisequity VI fund. Its first investment was a majority stake in Macchine Elettroniche Piegatrici in January.
Add-ons planned
Argos Wityu has agreed to buy a majority stake in Karl Schmidt, a bakery chain based in Germany, from Odewald KMU.
Preußisch Oldendorf-based Karl Schmidt operates 73 stores under the Bäckerei Schmidt brand in North Rhine-Westphalia and Lower Saxony.
Karl Schmidt’s management team will remain minority shareholders and continue to lead the firm.
“We will contribute our extensive experience in the food and consumer goods sector and many years of expertise in buy-and-build strategies to support the further expansion of the bakery group,” said Rainer Derix, partner at Argos Wityu in Germany, in a statement. “In particular, we’re planning to open additional locations, including in new regions, pursue add-on acquisitions and expand the production facilities accordingly.”
This acquisition is the eighth investment by Argos Wityu’s Mid-Market VIII fund.
PE tunes in
While some may yearn for the time one had to physically enter a store to buy music, the popularity of streaming services is music for private equity’s ears. In 2023, the number of paid subscriptions to music streaming services passed 500 million for the first time, according to the International Federation of the Phonographic Industry, and streaming revenues accounted for the majority of revenue growth and total share of the market.
PE firms have been busy picking up music catalogues and publishing assets to benefit from this growth. Blackstone recently joined the chorus with a bid to take London-listed music catalogue Hipgnosis Songs Fund private, with an offer that values Hipgnosis around $1.6 billion.
PE Hub Europe’s Nina Lindholm has compiled five more music catalogue deals, which includes PE firms like Blackstone, KKR, Pophouse and HarbourView.
Check out the listicle to find out the target companies involved in these deals.
Deal activity drops
Buyout deal activity in 2023 hit its lowest level in six years, plummeting by 32 percent from its peak, according to a report by Gain.pro, a private markets insights provider. The report focused its analysis on assets that are headquartered in Europe.
Entries were down 32 percent from their 2021 peak. “The slowdown in entries can primarily be attributed to high interest rates which raised borrowing costs for PE sponsors,” the report said.
The report defines PE-backed entries as those in which a PE firm took a minority or majority stake.
However, the latest data from 2024 is beginning to show signs of improvement, suggesting a potential turnaround for the market. “The estimated buyout deal count in Q1 of 2024 exceeded both 2023 and pre-pandemic levels.” The market seems to be “bottoming out” as the 2023 deal count was stable across quarters and entries in 2024 seem to have maintained a similar pace, it said.
Reflecting the overall market trends, add-on activity in 2023 also faced a downturn with deals declining by 31 percent year-on-year, though they still outpaced pre-pandemic levels. Sector-wise, services accounted for the largest share of add-on deals at 39 percent, followed by TMT at 21 percent and industrials at 13 percent.
Although add-on transaction volumes decreased, the report highlights that the ratio of add-ons to total PE deal activity in Europe remains close to its decade-high. Add-ons have become a crucial tool in value creation, with 73 percent of all PE deals being add-ons in 2023, up from 64 percent in 2018.
“Nearly half (47 percent) of the PE-backed businesses carry out add-on acquisitions, with 8 percent acquiring five or more companies in the last five years.” Add-on targets are cheaper to buy due to their smaller size, around 20 percent, compared to platform deals. However, recent data indicates that this discount is narrowing.
Financial services and services are the most active sectors for add-ons. The report attributes this to market fragmentation and complexities in capturing organic growth. “In particular, we see many British asset managers and insurers doing M&A to shore up their AUM and market share.” Within the services sector, the biggest consolidators are operating in the technical and professional services subsectors across Europe.
Nordics is the most add-on heavy region in Europe with 59 percent of assets there pursuing a buy-and-build strategy, it said.
Here are some of the add-ons we reported this week:
— Bregal Milestone’s portfolio company Allshares to buy a share plan and equity incentive administration provider
— Mutares’ portfolio company Ganter Group to buy a shopfitting services provider
— PSG Equity-backed Sport Alliance has acquired a global software provider to fitness and leisure businesses
— Bregal Milestone-backed Allshares will acquire a European compensation services provider
Regarding growth for PE-backed assets, it has been the strongest in years, the report added. On average, PE-backed assets grew 18.8 percent year-on-year in 2023, well above their pre-pandemic averages. Over the last five years, the median PE business achieved a CAGR of 13.8 percent.
TMT, financial services and science and health are the fastest-growing sectors for PE-backed assets, while consumer and industrials lag behind. “In addition to underlying growth, the three fastest-growing sectors are also characterised by above-average buy-and-build activity.”
