Hellman & Friedman executive criticises prices after Nets deal
Patrick Healy struck Europe’s largest buyout deal in nearly five years
The executive behind Europe’s largest buyout deal in nearly five years has hit out at the high prices the industry is paying in their pursuit of assets.
After Hellman & Friedman agreed to pay $5.3bn for Nets A/S, Scandinavia’s largest payments processor on Monday, Patrick Healy said: “Any time you buy something today it is at the highest price. We always focus on [so-called] winner’s curse.
“If you win, you obviously paid the highest price so how are you going to be able to deliver against that?”
H&F’s offer represents a roughly 30 per cent premium to the unaffected share price of Nets, or 24 times net income.
However, it is only a modest increase from the $4.5bn valuation Nets received when it when public nearly a year ago.
Buyout funds are sitting on a record amount of cash, fuelling pressure from their investors to deploy the capital. Industry insiders have cautioned that the amount of debt a company carries relative to its earnings has crept back up to all-time highs, meaning the deals could potentially go sour if the companies do not perform as expected or interest rates rise dramatically.
Addressing the terms of the deal, Mr Healy, deputy chief executive at H&F, said: “We paid the highest price and we paid the price we didn’t want to pay because that’s what was required to get the deal done.
“It’s a risk on environment . . . We are now in a market cycle where it is easier to raise money and it is easier to borrow money but it’s very difficult to find investment opportunities where you can execute.”
But he added: “Private equity firms are being selective about the risks they take.”
The agreed price for Nets surpasses a recently agreed €4.1bn takeover of German generic drugmaker Stada, which saw Bain and Cinven pay a 50 per cent premium to see off rival suitors.
Nets, which reported a 4 per cent year-on-year rise in revenues in the three months to June, will serve H&F as a platform to acquire other businesses outside its dominant Scandinavian region.
Payments companies have attracted the recent attention of private equity groups as banks, which traditionally have owned the bulk of these, do not regard them as core to their strategy.
Changing attitudes among consumers, who are increasingly moving away from cash and cheques, are also contributing to an interest in payment companies in Europe.
They are appealing to buyout funds because they can build scale and reduce costs.
Mr Healy expected hurdles along the way. “The biggest challenge is ensuring you stay ahead of the product development curve to be in front of adopting consumer behaviour,” he said.