It was announced yesterday that H2 Equity Partners, a European based equity firm, acquired Eurocell for an undisclosed sum. The mystery surrounding Eurocell and who was going to buy the company had fluctuated up and down for a long time previous to this. But now the move has been completed, I want to analyse the purchase to try and see what repercussions, if any, it will have on the market and Eurocell.
Eurocell
Eurocell are one of the biggest PVC profile manufacturers in the UK and have spearheaded the recycling movement in this country by opening a dedicated £3m recycling facility which has won awards.
They turned over around £150m last year and have endured the recent financial crisis well over the last few years. Despite this, their previous owners Tessenderlo had been looking to offload the company. Previously, rumours, mentioned on this site, had pointed to Synseal as a potential buyer. However this never materialised.
As well as supplying profile for window and door manufacturing, Eurocell boasts a powerful network of trade counters throughout the UK, as well as a very large portfolio of ancillary products.
H2 Equity Partners
H2 are a European based independent private equity firm that was formed in 1991. They are active mainly in Benelux, Germany and the UK and currently manage a portfolio of companies worth 2.5bn euros with an extra 500m euros of available funds.
Promisingly, they are known for purchasing companies and increasing their success – something which the team at Eurocell will be pleased to know I’m sure.
According to a press release on peHUB: H2 plans to build on Eurocell’s strong position in the PVC-u profiles and building products market to take the company forward in the coming years. H2 and management will work together to expand the national network, continue to develop market leading products and to continue to provide its customers with a leading and professional partner.
Analysis
As the rumours were swirling about the possible takeover of the company by Synseal, I did have concerns. A window company taking over another usually means that in the long run there would be job losses, merging and product cuts as the two companies eventually formed. We have seen it with other takeovers in the industry and I think employees at both companies would have been looking at that deal a little nervously.
However, H2, describing themselves as a “hands-on” equity firm, looks like a decent deal in the long run. They have an apparent track record of enhancing the companies that they purchase.
I have sometimes been critical of private investment firms. Some of our biggest firms have been owned by such companies and their stand-off approach to them has often meant the business goes down hill steadily. But, if H2 are prepared to roll their sleeves up, muck in and make sure the company continues to be invested in, then I can see good things over the nect few years.
On another positive note, if investment does come, this should be good news on the employment front. Job security is always important in large companies and with Eurocell employing nearly 1000 staff, I am sure they will be pleased to hear of any investment going in to the company.
Eurocell have issued a pretty typical statement which basically explains that they will remain an autonomous business, will continue to work to grow their customers’ businesses and that they will continue to invest in new products and services over the next 12 months.
Whilst on the face of it this looks to be a very positive purchase both for Eurocell and H2, both companies have to make sure that they have a close working relationship. If not, there is every chance that Eurocell could go the same way as others in this industry and fall by the wayside, if they don’t get the right help from H2. Direction, thought, planning and investment are key when a private equity firm takes over big fenestration companies, but if their promise of being hands on is worth something, then I don’t think this will be a problem.
The next 12 months are going to be interesting from a Eurocell point of view as they start to find out what plans H2 have for them, if any. But all in all, I think this is a positive acquisition, and all at a time when the construction sector and overall economy looks to be on the up.
Okay, I don’t know anything about this however, the “national network” quote, would imply that they want more build centres. Given the expectation of a housing build recovery, I would look for more acquisitions of trade centres/ trade centre groups?
Given the poor performance of many extrusion companies, you would still think that size is everything and either they will try and buy another extruder, or sell to one when they clear off in 5 to 7 years.
Seems that they bought it at the right time from how things are looking now, people are certainly enquiring more at present as opposed to 6 months ago.
It would seem that way. Companies back on the up, extra profit to pocket providing the business is run well.