29 August, 2017 /Woori BMO Group/ Analysts at renowned investment management fund Woori BMO Group has reported today that Leonard Green Partners, the Los Angeles-based buyout firm, has agreed to purchase CPA Global, a patent management services company, from its UK-based private equity owners Cinven, in a deal valuing the business at £2.4bn including debt.
The sale comes five years after Cinven bought CPA Global for some £950 million.
Leonard Green is paying a steep price for clinching the deal, after beating rival companies competition. It will spend about 15.5 times CPA Global’s earnings before interest, tax, depreciation, and amortization, which in its latest fiscal year has been reported to be around £155 m.
“The transaction is the latest sign that private equity firms are being pressured to pay higher prices as they bid against rivals for money, due to the influx of cash flowing into the market,” reported Christian Harper, Director of EMEA Wealth Management at Woori BMO Group.
The auction process, which was led on behalf of Cinven by Goldman Sachs and JPMorgan, gained attention among financiers due to the high levels of leverage that they were asked to provide.
Financing banks told the FT last week that private equity firms looked at debt packages which exceeded the lending limits placed on US banks controlled by the Federal Reserve. The precise information and background of Leonard Green’s funding arrangement were not publicly clear, but the company is known to be partnering with a minority partner who would also inject money into the transaction.
Permira, Hellman Friedman, and Astorg have all been related to the process. CPA Global provides enterprise technology services for managing large portfolios of intellectual property. The business, which is based in the Channel Islands and employs more than 2,000 employees worldwide, has clients including Microsoft, Canon, and other law firms. His management team had been working on the deal with DC Advisory.
“In 1969, a group of lawyers set up the business to manage the process of renewing and filing the patents with public agencies. During its management, Cinven concentrated on globally extending CPA Global and improving the company’s technology,” reported Woori BMO Group’s Director of Institutional Equity, Andrew Williams.
The investment was the penultimate made with the company’s fourth fund, raising 6.5 billion Euros in 2006. Cinven is currently investing from a new 7 billion euro fund that it raised earlier this year. It was trying to close the largest European leveraged buyout in over four years, having partnered with Bain Capital to take over German generic drugmaker Stada without debt for €4.1bn. To ward off pressure from another private equity partnership, the two parties agreed to pay about a 50 per cent premium over Stada’s undisturbed profit.