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Dealwatch: Bakers and Weil cement €5.3bn MBCC deal as advisers see renewed energy in M&A

Amid a continued dearth of big-ticket deals, Sika’s €5.3bn acquisition of Master Builder Construction Chemicals (MBCC) Group has been the standout in recent weeks, landing lead mandates for Baker McKenzie and Weil.

The deal saw Swiss construction chemicals group Sika acquire MBCC from private equity firm Lone Star Funds, which acquired it in 2019 after BASF disposed of that part of its business.

Headquartered in Germany, MBCC (formerly BASF Construction Chemicals) supplies chemicals and solutions within the construction industry across the globe in over 60 countries, turning over a total of €2.7bn every year in sales.

Baker McKenzie advised Sika on the transaction, coordinating with six major regulators to align behind a global timeline to remove competition concerns and divest MBCC’s concrete admixtures business to Cinven. The team was led by Florian Kästle in Frankfurt and global M&A chair Jannan Crozier in London and also included partners Alan Zoccolillo in New York, James Heller in London and Christian Atzler in Frankfurt.

Weil acted for Lone Star with a team led by London managing partner Mike Francies and including corporate partner Max Oppenheimer in London, antitrust partners Niklas Maydell in Brussels/London, Brianne Kucerik in Washington DC and Adam Hemlock in New York. The team also included corporate partner Manuel-Peter Fringer in Frankfurt.

Bakers’ Florian Kästle spoke to Legal Business about the significance of this transaction: ‘On a personal level, Sika was my first client at Baker McKenzie and this has been the biggest deal of my career. 20 years ago, Sika looked up to MBCC as the giant in the market and the idea of Sika actually buying MBCC was out of reach– no one would have thought that was possible. Now Sika is the undisputed number one.

‘This was also the first deal to be closed since Brexit that posed cross-UK/EU antitrust concerns which had to be resolved by the authorities in both jurisdictions in an aligned way. We found a timetable that both authorities were able to work alongside and found a remedy package that they accepted. This has never been done before in the post-Brexit era. I am glad it worked out as it was complex to get there.’

London-based Crozier told Legal Business about what this deal represents in the context of the current M&A market: ‘There is increased regulatory scrutiny regarding transactions and we had six regulators who would not approve of this one. We worked alongside Sika to get them to align on a regulatory global timeline for this deal and enable the deal to go forwards. What we were able to do in this transaction was not only overcome these regulatory hurdles, but we were able to find a buyer for the parts of the business we couldn’t own and implement a carve-out of several jurisdictions and implement them on the same day.

‘A key message in all of this to the market is that this period of increased scrutiny on deals does not have to represent an obstacle to M&A. A proper understanding of the market and the right advisers can get these deals done and provide an opportunity for clients.

‘We managed to agree with Lone Star who were the ultimate owners that it would commit a huge amount of work to carve out the business before Sika even owned it. If you look at the market several years ago, carve-outs were considered a trend but now they are a way of achieving deals that before now the market thought were not doable. These are not deals that are too complex to close – there is always a pathway through if you are willing to find it.’

When asked about predictions for the market and the pipeline of work, Crozier added: ‘We have seen a dip in the volume of deals lately which is a facet of inflation, of the banking crisis and geopolitical risk. I expect there will be an uptick in the market in the latter part of the year. One of the focuses will be on deals that were not considered possible to achieve.’

Kästle concluded: ‘I currently have a nice transaction in the healthcare space on my desk. The fears that carve-out and reorganisation is too complex are declining. There were two other major firms involved on the consulted by Sika for the antitrust analysis deal and all three said that it could not be done. Standing up and saying, “yes there are difficulties to overcome, it is not a piece of cake but in the end, we can do it” paid off.’

Meanwhile, American private equity firm TowerBrook Capital Partners acquired a majority stake in UK-based electric vehicle charging port manufacturer and installation provider Envevo.

This is the second deal struck via TowerBrook’s positive impact initiative which aims to invest in industries and businesses that are focused on improving the wider community, society and environment.

Goodwin’s London private equity team advised TowerBrook on its latest acquisition, having already provided counsel on its acquisition of telecom network hardware and asset management services company TXO in the same week (the first investment that was made in the name of its positive impact scheme).

Envevo was represented by Addleshaw Goddard partners Arran Mackenzie and Alan Shanks.

Goodwin’s Iwasko discussed TowerBrook’s acquisitions of Envevo and TXO with Legal Business: ‘These deals are significant because they are the first two investments by TowerBrook’s new impact fund, TowerBrook Delta. Delta invests in businesses that are making a positive impact around the world.

‘I have seen multiple electric vehicle charger businesses come across my desk in the past few months as private equity sponsors focus on renewable energy targets and impact investing more generally. It is notable that a private equity firm of TowerBrook’s size and stature has decided to devote time and capital to making these socially and environmentally meaningful investments. Other sponsors are showing interest as well. It is a positive story.’

When asked about market prospects, Iwasko said: ‘European private equity activity is picking up. People around the City were talking about writing off 2023 earlier in the year, but that is not the case. I am seeing increased activity in a number of sectors.’

Tong added: ‘In addition to the uptick in LBO activity, we are also seeing traditional private equity sponsors continue to be quite creative in how they are deploying capital, such as through minority investments and structured equity.’

Elsewhere in the sustainable energy market, subsidiary of the Ocean Winds collection of UK renewable energy developments, Moray West offshore wind farm, has secured £2bn in limited-recourse project financing for its 882MW project to reach financial close.

Moray West is the first project from the 2022 Allocation Round Four of the UK government’s initiative for assisting the generation of low-carbon energy, Contracts for Difference, to reach financial close, as well as the first wind farm in the UK to depend on mostly corporate power purchase agreements for the commercialisation of its production.

Ashurst advised Moray West’s lenders in the securing of the project financing, with partners David Wadham and Nick Hilder leading on the deal, while Norton Rose Fulbright’s Rob Marsh acted as lead counsel on behalf of the project’s sponsors.

In the same line of work, last month also saw Burges Salmon advise German corporation BayWa on the sale of the sixth wind farm, Dalquhandy, to Greencoat UK Wind (represented by Natasha Luther-Jones and Stephen Atkinson from DLA Piper). Based in South Lanarkshire, Scotland, Dalquhandy is a 42MW wind farm that will produce enough electricity to provide 31,000 homes with power in the UK.

Having advised before on BayWa’s initial purchase of Dalquhandy, Burges Salmon also negotiated a ten-year fixed price power purchase agreement with the BT Group for 80% of its output.

Partner Danny Lee in Burges Salmon’s corporate team who led on the deal, gave his insights on the renewable energy market for Legal Business: ‘The market is reasonably buoyant, but energy prices have led to uncertainty, particularly with the levy the government was proposing to introduce. Project connection times are putting certain investors off but there are also new technologies coming on the scene, hydrogen being an obvious example but also battery energy storage systems which are galvanizing the sector. These are forces that are driving a lot of the deal activity we are involved in.’

Focusing on the sale of Dalquhandy wind farm, Lee explained: ‘This deal clearly demonstrates that there is still an appetite for good quality projects in the offshore wind space. In terms of BayWa, we acted for them to acquire the assets when it was a consented project and they built it out and constructed it and ultimately sold it.’

He concluded: ‘One of the interesting things is that the arrangements surrounding the stakeholders who purchase the outputs of windfarms are becoming particularly innovative. We are going to see corporations like BT enter into purchase agreements with windfarms because of ESG obligations. Companies must demonstrate that they are doing the right thing to reach net zero. The best way to do that is to enter into purchase agreements with windfarms.’