Change of direction of exit from pet supplements business due to increase in PE transactions in this sector

Private equity firms simply can’t get enough of the pet sector. This morning we have a new deal to report involving Inflexion and Gryphon Investors, while we talk to Houlihan Lokey about some of the trends driving PE interest in the sector.

We also have offers from various sectors.

Tikehau Capital acquires majority stake in utility infrastructure services company from Oaktree Capital Management.

Pictet Alternative Advisors has acquired a UK managed IT services provider.

Believe, a digital music company owned by private equity firms EQT and TCV, is buying a stake in an independent dance music company.

Finally, Brookfield is in talks to take the Spanish drugmaker private.

Playing with animals

Private equity is making big gains in the pet sector, with Inflexion the latest to announce a deal this morning. Inflexion Enterprise Fund IV will achieve a 5.5x return by selling pet supplement supplier Lintbells to Gryphon Investors-backed Vetnique Labs.

Based in Hertfordshire, UK, Lintbells provides pets and their owners with science-backed supplements to help with chronic health conditions. Its products are sold under the YuMOVE brand.

These types of transactions are part of a trend known as the “humanization of pets” – something that PE Centre in Europe Irien Joseph discussed this issue in detail with Robert Ober, senior vice president of consumer investment banking at Houlihan Lokey.

This shift in perspective “changes the way pet owners view and treat their animals, aligning their needs with those of humans,” Ober said.

The human healthcare aspect is increasingly being reflected in the pet sector, with spending on high-quality pet foods and other health and wellness products that support preventative pet care. “Additionally, advanced medical care is gaining popularity as pet owners are willing to pay more for products that offer health benefits and improve the quality of life for their pets.”

The focus on less processed, nutrient-dense foods and technology-enabled health solutions, including pet apparel and smart products, mirrors trends in human health and is driving growing demand for “high-quality, innovative pet care solutions.” Semi-moist cat food is a notable category, according to Ober, that is seeing double-digit volume growth, driven by growing consumer demand for high-quality, “real-looking” pet foods.

A recent deal reflecting this trend is Cinven’s agreement to sell a majority stake in Partner in Pet Food, a pan-European pet food producer, to CVC.

Houlihan Lokey expects next-generation pet health — such as advanced diagnostics, testing, imaging, treatments — pet pharmaceuticals and supplements to be key beneficiaries of this trend. This will provide “buyers with access to higher prices and more pockets in the consumer’s wallet, which will drive growth beyond pet ownership,” Ober said.

Read the full interview to learn more about where private equity investors are engaging with this trend.

Tools

Tikehau Capital has signed a majority investment in CEBAT, an Italian utility infrastructure services provider. Oaktree Capital Management is the seller.

CEBAT, headquartered in Rome, installs utility networks and provides maintenance services that are key to improving and modernizing energy, water, and telecommunications networks. In 2023, the company had revenues of more than €200 million, and has more than 1,000 employees and 15 operating centers in Italy, Spain, and Germany. It serves large utilities such as Terna, Enel, Acea, and TIM.

“Our investment will focus on leveraging the group’s strong credentials with industry-leading customers and the growth potential of its reference markets, driven by the significant investments expected in the coming years to decarbonize and increase the efficiency of utility networks,” Roberto Quagliuolo, deputy head of private equity and head of Italy at Tikehau Capital, said in a statement. “CEBAT is an ideal fit given its key role in expanding and modernizing network infrastructure to facilitate the energy transition.”

Support for SMEs

Pictet Alternative Advisors’ private equity team has acquired Technology Services Group (TSG), a UK-based provider of managed IT services.

Headquartered in Newcastle, TSG is a fully accredited Microsoft Solutions Partner for small and medium-sized businesses in the UK. It specialises in delivering IT services across the Microsoft ecosystem and helps businesses transition to a cloud-based IT infrastructure. It employs over 250 full-time staff across offices including London and Glasgow.

According to the release, the company provides services to 1,300 clients in the growing IT services market, which is driven by strong demand for outsourcing, digitization and cloud transformation.

Dance steps

Believe, the digital music company owned by private equity firms EQT and TCV, has signed a partnership with independent CEE dance music company Global Records. Believe has acquired a 25 percent stake in Global as part of the deal.

According to Believe, citing an IMS business report, the value of the dance music market is estimated at $11.8 billion.

EQT and TCV formed a consortium to bid for Believe shares, along with Denis Ladegaillerie, the company’s founder, chairman and CEO, in February. The offer was for €15 per share, valuing the total number of shares outstanding at around €1.5 billion.

The consortium announced in June that it controls about 95 percent of Believe’s share capital.

Pharmaceuticals

Speaking of private acquisitions, Brookfield said in a regulatory filing yesterday that it had held talks with shareholders of Spanish drugmaker Grifols about a potential bid for the company. Brookfield and some of the shareholders had requested access to conduct due diligence, the filing said.