For a listed company, an international acquisition brings complexity
Céline Méchain, Partner at Goldman Sachs Paris, Yves Ayache, Managing Director at Morgan Stanley, and Mathieu Gross, Managing Director and Global Head of TMT Investment Banking at Crédit Agricole CIB advised Altran on its acquisition of Aricent. In this interview, they reflect on the principal complexities and the keys to success when a listed company undertakes a “transformative” acquisition.
Aricent – Altran was a €2 billion megadeal
“Altran’s acquisition of Aricent was unique”, Céline explained. “It signalled the emergence of a world leader in outsourced R&D, a sector that had not seen major consolidation until then.” In August 2017, Altran set out to win over the US company, held at the time by KKR. The process took nine months and can be divided into three stages. First, Altran had to negotiate an acquisition contract and obtain exclusivity. Altran assigned this job to three investment banks: Crédit Agricole CIB, Goldman Sachs and Morgan Stanley. KKR wanted a 100% cash transaction, and Altran had to announce the financing terms at the same time as the acquisition so it could present the transaction to investors during a roadshow immediately thereafter. The second stage was syndicating a €2,125 million senior secured term loan B in February 2018. “When the debt market regained momentum at the start of the year, Altran was able to obtain excellent terms”, added Mathieu. In March 2018, Altran carried out the third stage: a €750 million capital increase, which closed on 13 April, oversubscribed by 157%.
Altran’s acquisition of Aricent was a turning point in the French company’s history. Owing to this transformative transatlantic deal, Altran confirmed its position as world leader in innovation and high-tech engineering consulting. “The merger is very complementary in terms of geographies, lines of business and people. It corresponds both to changes in the industry and to customer expectations”, Mathieu specified. “The deal was closed at a valuation in line with Altran’s and included significant and realistic synergies”, added Yves.
To win over the market, nothing was left to chance
Although Altran’s acquisition of Aricent made perfect sense, it was not without complexity for the French market leader. “Given Altran’s size, Aricent was a very big target, and that specificity made the deal unique”, Céline explained. “The timeline was short and the process competitive”, Yves added. There were the usual challenges: evaluate the risks reliably, calibrate the financing so as to avoid superimposing an operational risk on a financial risk, avoid talent flight or an unfavourable customer perception, and properly manage confidentiality and facilitate communication. “This last point is critical when you are asking investors to take part in the deal”, Yves said. “The success of the transaction depends largely on the market’s reaction. If the market reacts negatively there will be a feeling of uncertainty, and that could endanger the transaction”, Mathieu added. For this reason, Altran took pains early on to explain and communicate the transaction to investors, and that strategy paid off.
Dominique Cerutti’s team was extremely meticulous, and this was Altran’s greatest strength. “Altran thought about how to integrate Aricent seamlessly well in advance. Investors placed a lot of importance on this aspect”, said Yves, Mathieu and Céline. “The relationship of trust between Dominique Cerutti and Frank Kern, CEO of Aricent, figured prominently in the success of the transaction”, Mathieu added. Other key aspects of Altran’s acquisition of Aricent included its “overall consistent” valuation, its realistic and scrupulously executed business plan, a reasonable debt level and a good evaluation of the synergies. These factors enabled Altran to defend the deal when presenting it to investors and rating agencies.
Enterprising spirit and perfect coordination created a winning combination
“We are all very proud of our contribution to creating the world leader in this promising sector”, the three investment bankers said in unison. When they look back, Céline, Mathieu and Yves all say that there was perfect agreement on every operational aspect. “As a result, we were able to be enterprising, and we could see the deal through to completion with full coordination”, said Mathieu. Positive market conditions – the debt was successfully placed and 98% of shareholders subscribed to the capital increase – confirmed the winning strategy adopted by all the participants in this Franco-American deal.
The three bankers also found that Apax Partners played a key role throughout the transaction. “We were impressed by how much Apax Partners and Altran trusted each other and how smooth the dialogue between them was”, said Yves. “Apax Partners was active in preparing technical solutions, and their team worked alongside us to optimise every aspect of the transaction: structure, financing, financial communication, etc.”, he added. “When Altran’s management told the Board it wanted to acquire Aricent, Apax Partners supported the company through this transformation. The support of for the capital increase on the part of the investment fund and the company’s founders had a very positive effect on the market and contributed greatly to the success of this magnificent deal”, Céline concluded.
Source : Apax Talks