A $20 Billion Covid-Era Buyout Wasn’t Such a Bad Idea

Advent International and Cinven's €17 billion ($20 billion) leveraged buyout of Thyssenkrupp AG's elevator business in February 2020, initially perceived as a major misjudgment due to the impending pandemic, appears to be vindicated. A recent stake sale reportedly valued the business at a minimum of €23 billion, indicating significant appreciation and a successful outcome for the private equity consortium despite initial market fears.

Analysis

The leveraged buyout of Thyssenkrupp AG’s elevator division by a private equity consortium led by Advent International and Cinven for €17 billion in February 2020, initially perceived as a high-risk transaction due to its proximity to the pandemic's onset, is now demonstrating significant success. A recent stake sale has established a new valuation for the business at a minimum of €23 billion, representing a paper gain of over 35% for the consortium. This outcome suggests the initial market fears regarding the decline of commercial office space and shared environments were either overstated or short-lived. The vindication of this contrarian investment, made in the face of unprecedented macroeconomic uncertainty, highlights the resilience of essential infrastructure services and the ability of private equity to capitalize on long-term value propositions despite short-term market dislocations.

Key Decisions for Investors

• Investors with allocations to private equity funds managed by Advent and Cinven should view this as a strong validation of their managers' ability to execute contrarian strategies and generate significant alpha in challenging market cycles.
• The resilience and re-valuation of this elevator business underscores the investment case for essential, non-discretionary infrastructure and service assets, which can offer defensive characteristics and value appreciation even through economic shocks.
• The successful partial exit at a high valuation may signal a favorable environment for future PE-backed M&A or IPOs, suggesting investors should monitor the pipeline for potential exit opportunities from large-cap buyout funds.