Coates Hire buyout Q&A
ABN Amro's Tim Longstaff discusses Australia's biggest public to private deal.
It was a year that promised so much for private equity transactions, but by the end of 2007 much less was achieved than the buyout groups would have expected – undone, perhaps, by a mixture of their own hubris and the credit market turmoil. Last Thursday, however, saw the completion of the buyout of Coates Hire by a consortium with the unfortunate name of NED, comprising Kerry Stokes' National Hire and Carlyle Group. With an enterprise value of $2.9 billion, it is the largest public to private deal ever completed in Australia. Tim Longstaff, the head of financial sponsors group, M&A, at ABN Amro, who advised Carlyle, agreed to answer our emailed questions.
Q: What made this transaction unique in your view?
TL: This was a unique transaction because of both its size and its complexity. It is Australia's largest ever completed "public to private" transaction, and a complex combination of simultaneous acquisition, merger and leveraged financing executed in turbulent market conditions.
Q: It has been of the few significant buy-out deals to be completed in Australia in 2007. Why did yours succeed where others failed?
TL: We succeeded due to four things: a sound strategic rationale ... the merger with National Hire was a unique angle that provided synergies and real strategic merit to bridge the value gap; tenacity ... we stuck to it; our ability to access competitive financing in difficult times; and Carlyle's willingness to use their global knowledge of the hire sector and "take a view".
Q: What were the biggest hurdles facing the bid?
TL: The biggest hurdles were financing, due to size and market conditions, and helping the Coates board understand that the offer was fair.
Q: What was ABN Amro's key value add?
TL: ABN Amro originated the transaction and introduced Carlyle to Coates management. We also led the debt race from start to finish, more as the tortoise than the hare, and the consistency of our debt views, market knowledge and depth of analysis were valued contributions.
Q: What was the debt component and did it need to be re-priced or renegotiated during the course of the negotiations because of the credit market problems?
TL: The debt was robustly negotiated - what was arrived at is a sensible and sustainable structure tailored to Coates. It has not needed to be renegotiated.
Q: How did this bid different from other deals you've put together in 2007?
TL: Most of the other acquisitions done this year, not just by us, were private treaty transactions. Public markets are more difficult due to the greater scrutiny and the broad range of interested stakeholders. We are improving, but I still think corporate Australia has a way to go in responding appropriately to private equity approaches.
Q: What's your prediction for the course of buy-out deals in 2008?
TL: Private equity is here to stay. It has a legitimate place offering an alternative source of sale liquidity and value discovery for investors. Debt markets have come back, but only to remove some of the "froth". Accordingly, there should be a good mix of buy and sell deals for private equity in 2008.
Q: Will we see more purchases or more exits?
TL: I think 2008 will be a year of private equity exits, especially if equity market conditions remain robust.
Q: Is advisory work on buy-outs more profitable for corporate advisors than trade purchases?
TL: There is no clear answer. One needs to balance complexity, probability and relationship.
Q: What was your fee on the Coates transaction?
TL: Not disclosed
Q: What made this transaction unique in your view?
TL: This was a unique transaction because of both its size and its complexity. It is Australia's largest ever completed "public to private" transaction, and a complex combination of simultaneous acquisition, merger and leveraged financing executed in turbulent market conditions.
Q: It has been of the few significant buy-out deals to be completed in Australia in 2007. Why did yours succeed where others failed?
TL: We succeeded due to four things: a sound strategic rationale ... the merger with National Hire was a unique angle that provided synergies and real strategic merit to bridge the value gap; tenacity ... we stuck to it; our ability to access competitive financing in difficult times; and Carlyle's willingness to use their global knowledge of the hire sector and "take a view".
Q: What were the biggest hurdles facing the bid?
TL: The biggest hurdles were financing, due to size and market conditions, and helping the Coates board understand that the offer was fair.
Q: What was ABN Amro's key value add?
TL: ABN Amro originated the transaction and introduced Carlyle to Coates management. We also led the debt race from start to finish, more as the tortoise than the hare, and the consistency of our debt views, market knowledge and depth of analysis were valued contributions.
Q: What was the debt component and did it need to be re-priced or renegotiated during the course of the negotiations because of the credit market problems?
TL: The debt was robustly negotiated - what was arrived at is a sensible and sustainable structure tailored to Coates. It has not needed to be renegotiated.
Q: How did this bid different from other deals you've put together in 2007?
TL: Most of the other acquisitions done this year, not just by us, were private treaty transactions. Public markets are more difficult due to the greater scrutiny and the broad range of interested stakeholders. We are improving, but I still think corporate Australia has a way to go in responding appropriately to private equity approaches.
Q: What's your prediction for the course of buy-out deals in 2008?
TL: Private equity is here to stay. It has a legitimate place offering an alternative source of sale liquidity and value discovery for investors. Debt markets have come back, but only to remove some of the "froth". Accordingly, there should be a good mix of buy and sell deals for private equity in 2008.
Q: Will we see more purchases or more exits?
TL: I think 2008 will be a year of private equity exits, especially if equity market conditions remain robust.
Q: Is advisory work on buy-outs more profitable for corporate advisors than trade purchases?
TL: There is no clear answer. One needs to balance complexity, probability and relationship.
Q: What was your fee on the Coates transaction?
TL: Not disclosed
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