KKR Led Consortium Acquires Accell Group
DEAL OVERVIEW:
● Announcement date: 24 January 2022
● Industry: Leisure — Consumer Cyclical
● Deal Value: EUR1.56 billion (USD1.76 billion)
● Deal Consideration: All-cash offering of 58 euros per share — a 26% premium over Accell Group’s closing share price on Jan. 21, a 42% premium over its three-month volume-weighted average price per share, and a 21% premium to Accell Group’s highest closing share price of 48 euros per share
● Acquirer Financial Advisor: Goldman Sachs Group Inc.
● Acquirer Legal Advisor: Clifford Chance LLP
● Target Financial Advisors: Axeco Corporate Finance
● Target Legal Advisor: NautaDutilh N.V.
● Expected Completion: Late Q2 or early Q3 2022
Acquirer Details: Kohlberg Kravis Robers (KKR) & Co. Inc.
● Founded: 1976
● HQ: New York, United States
● Market Cap: USD42.39 billion
● EV: USD68.77 billion
● LTM EBITDA: USD18.53 billion
● EV/LTM EBITDA: 3.71
Additional Information
KKR is a leading global investment company that manages multiple asset classes, which include private equity, real estate, and credit. It specializes in acquisitions, leveraged buyouts, management buyouts, credit special situations, growth equity, distressed, turnaround, and lower-middle and middle-market investments. The firm considers making investments in all industries with a particular focus on software, consumer electronics, renewable energy, and consumer products to name a few. It invests globally and concentrates its investments on Australia, emerging and developed Asia, and developed European countries such as the Netherlands.
Target Details: Accell Group N.V.
● Founded: 1998
● HQ: Heerenveen, Friesland, The Netherlands
● Market Cap: USD42.39 billion
● EV: EUR1.551 billion (USD1.75 billion)
● LTM EBITDA: EUR119 million (USD134.62 million)
● EV/LTM EBITDA: 14.26
Additional Information
Accell Group is an international group that specializes in designing, developing, and manufacturing bicycles, as well as their parts, and accessories. They are the European market leader in e-bikes and the second-largest entity in parts and accessories. They own several well-known bicycle brands in their portfolio including Sparta, Haibike, Ghost-Bikes, Hercules, Winora, and Raleigh. They sell their bicycle parts and accessories under XLC.
STRATEGIC RATIONALE:
One of the big “winners” that emerged from the COVID-19 pandemic was the cycling industry. Cities across Europe added cycle lanes so that people can cycle as an alternative to public transportation. Moreover, climate change concerns incentivise European citizens to choose greener options over petrol cars and public transport. These are some factors that demonstrate a rise in investments in the cycling space which topped EUR1.5 billion and fueled unprecedented production growth in Europe.
Complementary to this, Boris Partin, a director of Baird’s European Global Investment Banking division has commented on the matter by saying: “Trends that might have come into play over a five to ten year period have been bunched up by the Coronavirus and the shifts have been seismic. Most notably, investment has accelerated in the active living segments, all sustainability driven markets and micro-mobility”. Since cycling fit these criteria, it is understandable that it attracted a considerable amount of investment in the past two years.
Private ownership of Accell Group would enable it to expedite its business strategy in the coming years. This would be achieved through investing in strategic growth initiatives while also hedging against business risks that may arise in the form of supply chain volatility and rising global inflation.
Accell Group’s chief executive, who will be remaining to lead the company’s board, commented on the matter by stating that: “With the Consortium as our new shareholder we will have a financially strong and knowledgeable partner to accelerate the roll-out of our existing strategic roadmap, enhance our global footprint, explore suitable acquisitions and further leverage our scale”.
A separate strategic reason for this acquisition may include the competitive pressure that Accell Group is facing from its main competitors. One of Accell Group’s Dutch competitors, VanMoof, will begin selling his high-speed e-bike model, called the V, by the end of 2022. The company had raised USD128 million in September 2021, which made it one of the most-funded e-bike startups globally.
The acquisition of Accell Group marks another milestone for KKR to expand its presence in the consumer and mobility sectors. The Private Equity giant had previously placed investments in Trainline, Lyft, Boots along with many others. The entity has been enlarging its business portfolio in the Netherlands as well through making strategic investments in companies such as Roompot, QPark, Exact, and a few more.
The KKR led consortium has also been reported to support Accell Group’s ESG initiatives for green mobility. This does not come as a surprise as the private equity entity is known for its commitment to social responsibility and sustainability. KKR has been selected as one of the Private Equity Innovators in ESG in 2021 by Mergers&Acquisitions.
Risks Associated with the Deal
Rising global inflation provides a significant risk for the profitability of Accell Group. If today’s rising global inflation leads to a contraction in several industries, the earnings growth potential of KKR’s businesses, including Accell Group, may decrease. A rise in inflation might diminish their profits through inflicting price hikes to its customers.
A rise in inflation also calls for strong account and business management capabilities. In a high inflationary environment, to ensure the stability of any business, companies need to place a large emphasis on working capital management. This represents effectively controlling for inventory, accounts receivables and payables. This is important as if the sales revenue of Accell Group dips, the management team would need to step in and make sure that the working capital is effectively managed to ensure that the earnings of the firm would not diminish significantly. Thus, KKR, as the lead of this Consortium, would need to ensure that the management team is effectively managing the Group’s working capital through the high inflationary environment.
Analyst: Mert Kiper.
References:
https://cyclingindustry.news/investors-in-the-cycling-industry/
https://cyclingindustry.news/accell-group-bought-by-kkr-consortium/
https://finance.yahoo.com/quote/KKR/profile?p=KKR
https://finance.yahoo.com/quote/ACCEL.AS/profile?p=ACCEL.AS
https://www.themiddlemarket.com/news-analysis/kkr-named-to-2021-pe-innovators-in-esg
