Rlpc loan bankers left frusturated by surprise buyouts

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May 3 Bankers are growing increasingly frustrated as more buyouts move away from auction processes and deals are struck behind closed doors after privately held talks. Such private deals render work on potential buyouts useless. The recent buyouts of German insulation firm Armacell by Charterhouse and German metering company Ista by CVC came as a surprise to a majority of bankers who had been working on alternative deals for both companies."There is a big embarrassment factor. If something happens you don't know about, you get a call from your boss asking why you don't know about it. It is supposed to be a confidential industry but that is not the case, so it is expected that bankers should know what is happening on each deal," a syndicate head said. A leveraged finance banker added: "You can't predict a smoke-filled room. The market is fickle and if you invested a lot of work on something it is vexing if a surprising deal suddenly happens and is taken away from you."

Bahrain-based private equity firm Investcorp agreed the sale of Armacell this week for more than 500 million euros ($653.65 million), despite an auction process that stalled earlier in the year when bids from Charterhouse and other potential suitors were deemed to be too low. After the sale stalled, Investcorp considered alternatives, including holding on to Armacell, and lined up a dividend recapitalisation. Four banks committed fully underwritten financing for it and it was considered a legitimate alternative. However, Charterhouse returned to the table with an offer of over 500 million euros, leading Investcorp to discard the dividend recapitalisation and push ahead with the sale.

BIGGER OFFER Last month, CVC trumped rival BC Partners to buy a 76 percent stake in Ista it did not already own from co-owner Charterhouse in a 3.1 billion euro deal.

No one was really aware of CVC's interest in buying Ista and frustrations arose from bankers backing other potential sponsors when they realised they would not be part of Germany's largest private equity deal since 2008. A number of bankers called the deal a "loss of face" for them. Deutsche Bank underwrote the entire financing."It is quite interesting that two deals have recently sold to unexpected buyers. Maybe it is a result of fewer auctions, not wanting to get bogged down in competitive processes and people trying to work around the system. Sponsors have the upper hand in these negotiations as relationships to sponsors are key to major banks, so there is nothing they can really do," a leveraged finance lawyer said. It is not clear whether striking a sale via private negotiations will become a trend, or whether it is just a feature of a sellers' market due to a lack of deals and an excess of liquidity. Other companies that may be subject to private sales include French catering firm Elior and German academic publisher Springer Science."These private situations are occurring and there is nothing you can do about it, unless the sponsor makes you part of the lucky circle," a second leveraged finance banker said. ($1 = 0.7649 euros)