HIG Europe latest to shelve deal amid macro uncertainty

HIG has pulled the sale of German chemical company HCS Group, for which it hoped to get approximately €500 million, in recent weeks, people familiar with the matter said.

The decision to pull the sale came about due to differences over pricing between the seller and the potential buyers alongside concerns over the current macroeconomic environment, one of the people said.

The pan-European buyout firm had acquired a majority stake in Haltermann Products in 2011 before merging it with Petrochem Carless in 2013 to form the HCS Group.

Chris Kellett, head of private equity in Germany at Clifford Chance, said: “Valuations have been high for the last couple of years and we’re not really seeing much of a shift [downwards] in them yet.”

But he said that due to the macroeconomic uncertainty, buyers increasingly believe prices should be lower than current levels. He said: “There are questions over the direction the world economy is heading and people are becoming more risk aware. Buyers will be hoping for valuations to reset.”

The HIG deal is not the only scheduled sale process to have fallen by the wayside over a mismatch in pricing expectations. Advent International’s planned sale of Dutch pharmaceutical business Mediq has also been pulled in recent weeks with the private equity firm instead deciding to take a €200 million dividend out of the company in a dividend recap.

A number of large-cap buyout firms including CVC Capital Partners and Clayton Dubilier and Rice submitted bids that fell short of Advent’s price expectation, a person familiar with the matter said.

Brexit itself has had an impact on some European deals, according to Axel Beck, co-head of financial sponsors group at JP Morgan.

He said: “What we have seen is that the UK transactions have markedly slowed down. Very few sponsors are selling at the moment, particularly portfolio companies which have heavy exposure to the UK market.”

Cinven put the sale of European web host supplier Host Europe on ice following the referendum. The business has exposure to the UK and Cinven wanted to assess what impact Brexit might have on its UK operations before selling it, according to a person familiar with the matter.

Meanwhile, Caledonian Investments also abandoned the sale of UK caravan park operator Park Holidays, after potential acquirers’ voiced concerns about the impact of Brexit on consumer spending, people familiar with the matter said.

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