Wendel seeks further private equity deals after IK partners investment

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French private equity group Wendel is seeking more acquisitions in the industry after taking a controlling stake last month in UK-based buyout firm IK partners, its chief executive has said.

Laurent Mignon, who joined in early 2023 after a long run in banking including as chair of Natixis parent BPCE, said higher interest rates, harder fundraising conditions for private equity groups and looming successions at some companies were opening the way for deals.

In March Wendel announced a €2bn pot for buyouts and other investments over a two-year horizon. The family-backed firm, which has €9.6bn in gross assets under management, is scouring the market for targets as it branches into managing money for outside investors for the first time with the IK Partners deal, and could consider partnering with other investment managers.

“We have capacity to keep doing investments and we’re looking at other opportunities,” Mignon told the Financial Times. Wendel has roughly €1bn of acquisition funds left after also buying a controlling stake in engineering consultancy Scalian this year, and pledging to invest in up to 10 per cent of IK’s future funds.

Other big private equity groups have also been looking at rivals, with CVC taking a stake in Dutch infrastructure investor DIF Capital Partners in September. The likes of EQT have also predicted a wave of deals as the industry faces a reckoning after a prolonged period of low rates came to an abrupt end. 

“In periods of euphoria, everyone thinks they can go it alone,” Mignon said.

Borrowing has become more expensive and higher rates have hit the valuations of private equity portfolios, causing the flow of deals to evaporate. But the tougher conditions had also made some investment managers more willing to strike partnerships or welcome new owners as they seek capital, and had allowed Wendel to expand into managing funds for third parties, a move it had considered in the past but never seen through, Mignon said. 

“The moment is a good one because there is a period of transformation in the industry that has made it possible,” he said. 

“This is a moment of consolidation, which is something quite healthy,” Mignon added. “If I thought we were past the [private equity] golden age and it’s over — I don’t, on the contrary . . . But there’s been a form of exuberance and now the market is stabilising and consolidating.”

Wendel started out 318 years ago as a steelmaker before reinventing itself in the past 40 years. It has long been a “permanent capital” group, investing its own money in acquisitions, including in certifications group Bureau Veritas and Acams, a group focused on detecting money laundering. 

Wendel now wants to access the regular fees that managing funds for third parties can bring. Investment managers are meanwhile becoming more drawn to stable sources of capital, according to Mignon, who said he had talked to several interested parties in recent months. 

In the deal struck with IK Partners chief executive Christopher Masek, Wendel will spend €383mn on a 51 per cent stake and buy out the remaining 49 per cent in a staggered fashion between 2029 and 2032. Masek has committed to stay on for six years at the group, which specialises in mid-market acquisitions.

Wendel’s new venture means it joins a small pool of French-listed investment managers including larger firms Eurazeo and Tikehau Capital. Bankers and rival investment management specialists have said the strategy carries risks, however, including that it can take years to develop the type of record that investors in private equity funds will be willing to support. 

That means hanging on to people with existing credentials in that field or the teams Wendel will acquire at IK will be key, with an executive at a rival company warning that the cultural fit in such acquisitions was the hardest issue to resolve.

“This could only be done with the right teams,” Mignon said of the IK deal. “In tougher times . . . those who are able to raise funds are those that are recognised for their talent and the specificity of what they bring to the table.”