Pitch Best Deal 2022: Consortium, KKR & Co – Accel Group

Name of the deal: Public offer by consortium led by KKR & Co. for Accel Group 
Date announced: 24 January 2022 
Date closed: 01 June 2022 
Published value: 1.56 billion euros 
Buyer(s): KKR & Co., Teslin Capital Management 
Target: Accel Group 
Seller: Accel Group shareholders   

Involved firms and advisors 

Involved firms and advisors buy side:  
Goldman Sachs (M&A Advisory), EY (Financial Due Diligence and Tax Advisory), Deloitte (Tax Advisory), Clifford Chance and Allen & Overy (Legal advisory Corporate M&A), KKR & Co. and Teslin Capital Partners (Private Equity Management), Meines Holla & Partners (PR Consultancy), Georgeson (Consultancy) 

Involved firms and advisors target:  
AXECO and Rabobank (M&A Advisory), Van Doorne (Legal Advisory Corporate M&A and Tax Advisory), NautaDutilh and WAKKIE+PERRICK (Legal Advisory Corporate M&A), CFF Communications (PR Consultancy) 

Involved firms and advisors sell side:  
N.a. 

Pitch   

Brief description deal / Deal outline  
In January 2022, Accell Group and a consortium led by leading global investment firm KKR reached agreement on a recommended public offer by the consortium for all of the issued and outstanding ordinary shares in the capital of Accell Group, for a total consideration of approx. EUR 1.56 billion. Accell Group makes bicycles, bicycle parts and accessories. It is the European market leader in e-bikes and second largest in bicycle parts and accessories.  

This transaction marks an important step for Accell Group. Having the consortium as a financially strong and knowledgeable partner focused on long-term value enhancement will enable Accell Group to grow its business in an accelerated timeframe, to launch new innovations for green mobility and to strengthen its position as one of the world’s leading bicycle market players, against the backdrop of continued supply chain volatility and a dynamic global environment. 

Why should this deal win the Award for Best Deal 2022?  
For shareholders: Attractive premium on all-time high share price in difficult market conditionsThe offer of €58.00 per share represents an attractive premium of 20.8% premium on Accel Group’s all-time high share price representing attractive immediate value in a highly uncertain market and operational conditions. 

Operational challenges consist of the continued supply chain issues that have not disappeared and are expected to last in any case throughout 2022 and most likely also in 2023, and in addition to that significant inflation on costs, wages and transport and overall component availability remain a concern.  

For the Company and its employees: With KKR funding and expertise, Accell Group is well positioned to expand its business and become a global market 
Due to the very dynamic developments in the “e-bike” industry significant upfront investments are required. The competitive dynamics within the industry have changed significantly due to the entry of strong financially backed players.  

Private ownership will enable Accell Group to make these significant up-front investments, both financially as well as through expertise, which are difficult to impossible to realise in a public setting, in a shorter timeframe to:  

• Accelerate the execution of its strategy in the coming years through further investment in long-term strategic growth initiatives, including in innovation and brand development, digital marketing, direct to consumer / ecommerce platforms and capability, supply chain management and distribution capabilities, international expansion, bolt-on acquisitions and continued ESG improvement 
• Improve and protect its market position from increasing numbers of new entrants into the e-bike sector•  
• Mitigate the significant ongoing supply chain issues and inflationary pressures affecting the bicycle industry globally 

Achieving ESG goals: For the company ESG is key strategic pillar 
The bike industry is an ideal industry to support achieving ESG goals of governments and companies by increasing mobility, reducing congestion and reducing emissions. Accell Group and KKR are predetermined to further accelerate the achievement of the ESG targets of these organisations through the financial capabilities and competencies of KRR. 

Transaction complexity: Complex discussions regarding composition consortium 
The composition of the consortium created a complex dynamic due to the position of Teslin. As other shareholder were offered an exit, whilst Teslin created a position that they, as part of the Consortium, rolled over their stake benefiting therefore of the potential value creation KKR is planning to realise. Although this made the transaction complex towards all shareholders, the benefits of the transaction as a whole outweigh the potential concerns towards the position of Teslin. 

Unique transaction: Focus on long-term value enhancement makes this an atypical P2P 
Typical Public to Private (P2P) are focussed at optimalisation and attracting leverage while the Consortium has a focus on long-term value enhancement and envisages to benefit from an increase in value of Accell Group through continued investment, growth and profit generation by the Group, making this a unique and atypical P2P. The leverage of the Company allows a lot of headroom and flexibility to invest and KKR has committed a significant amount of equity (€1,150m) and willingness to further invest to accelerate growth. 

This was a high profile and high value deal in a sector which has an important role to play in the creation of a greener and more sustainable future, as well as the mobility and health of societies. Understanding the importance of these factors, KKR and Teslin saw the opportunities that Accell Group represents.  

This was not a straightforward take private, but one that took several months of careful negotiations, winning over a large proportion of shareholders who initially expressed dissatisfaction with the offer. In the end enough shares (96.9%) were reached to allow a complete delisting of Accell Group. 

Deal rationale:  
The consortium and Accell Group believe that the transaction promotes the sustainable success of Accell Group’s business.  

The consortium fully supports the current business strategy of Accell Group and intends to make available its experience and resources to accelerate a successful execution of Accell Group’s ‘Lead Global. Win Local’ strategy. A private setting with the consortium as shareholder would enable Accell Group to make significant up-front investments to mitigate the significant ongoing supply chain issues and inflationary pressures affecting the bicycle industry globally, heightened by an increased level of geopolitical uncertainty. It would also help Accell Group to protect its market position from increasing numbers of new entrants into the e-bike sector, and accelerate the execution of its strategy in the coming years through further investment in long-term strategic growth initiatives.  

Areas of significant investment will include innovation and brand development, digital marketing, direct to consumer / ecommerce platforms and capability, supply chain management and distribution capabilities, international expansion, bolt-on acquisitions and continued ESG improvement, among other areas. 

Private ownership will enable Accell Group to accelerate the execution of its strategy in the coming years through further investment in long term strategic growth initiatives, while also mitigating challenges brought about from supply chain volatility and rising inflation. KKR and Accell Group believe that the transaction offers shareholders significant and immediate de-risked cash value, against a backdrop of increased geopolitical uncertainty and ongoing volatility in global supply chains and equity markets. 

What is the impact of this deal for the company?  
Strategy 
The consortium subscribes to Accell Group's business strategy. It will support Accell Group to realise and accelerate such business strategy and will work with Accell Group to grow the business in a manner that reflects such business strategy. The consortium intends to make additional equity capital available if required in order for Accell Group to finance such growth and acceleration through a balanced combination of debt and equity. The business of Accell Group will remain substantially intact, taking into account the realisation of Accell Group's business strategy, and there will be no break-up of Accell Group or its business units or any divestment of a substantial part of Accell Group. The consortium will support Accell Group in furthering its current ESG goals, which are a core element of Accell Group's business strategy.  

Structure 
Accell Group will continue to have its own operating and reporting structure, and its headquarters, central management and key support functions, will remain in Heerenveen, the Netherlands. Accell Group will maintain its corporate identity, integrity, values and culture. The consortium envisages holding its shareholding in Accell Group for long-term value enhancement purposes.  

Financing 
Accell Group will remain prudently capitalised and financed to safeguard the continuity of the business and the execution of its business strategy (including accompanying investments). 

The investment of the Consortium means that Accell Group will be able to make significant up-front investments to mitigate the significant ongoing supply chain issues and inflationary pressures affecting the bicycle industry globally, heightened by an increased level of geopolitical uncertainty. It will also help Accell Group to protect its market position from increasing numbers of new entrants into the e-bike sector, and accelerate the execution of its strategy in the coming years through further investment in long-term strategic growth initiatives.  

Areas of significant investment will include innovation and brand development, digital marketing, direct to consumer / ecommerce platforms and capability, supply chain management and distribution capabilities, international expansion, bolt-on acquisitions and continued ESG improvement, among other areas. 

What is the impact of this deal for the direct stakeholders?  
Employees 
The existing rights and benefits of the employees of Accell Group will be respected, as will Accell Group's current employee consultation structure and existing arrangements with any employee representative body within the group. No reduction of the workforce of the group is envisaged as a direct consequence of the transaction or completion thereof. The deal also brings enhanced career opportunities for Accell Group's employees.  

Dealers, Suppliers and Business Partners 
Growth and growth acceleration opens opportunities for Accell Group's dealers, suppliers and other business partners that can grow along with the Group. 

Shareholders 
The all-cash offer also provided former shareholders with the opportunity to realise compelling and immediate value for their shares eliminating price risk related to the current operating environment and execution of Accell Group's strategy. Accell Group faces significant uncertainties, the most tangible challenges being the global supply chain disruptions and component shortages that are expected to continue throughout 2022, coupled with rising inflation also in context of the current global and geopolitical uncertainties. 

According to Accell Group CEO Ton Anbeek, with the Consortium as their new shareholder, Accell Group now has the benefit of a financially strong and knowledgeable partner to accelerate the roll-out of their existing strategic roadmap, enhance their global footprint, explore suitable acquisitions and further leverage their scale. “As such, the transaction will enable us to take a leap forward as a group which also brings along enhanced career opportunities for our employees.” 

What is the impact of this deal on society?  
Accell Group has said that it continuously strives to be a leader in the bicycle industry by combining smart design and innovative technology with the best value and customer experience. With KKR coming on board as majority shareholder, and with the continued support of Teslin, they plan to accelerate the execution of their strategic agenda, launch new innovations for green and sustainable mobility and support with a focus on the benefit for people and communities.  

Cycling brings the world a step closer to a clean environment and a better climate. It promotes physical and mental resilience and helps create pleasant, livable cities with fewer traffic jams, less noise and reduced air pollution. For Accell Group, it is people who make the difference in how we design and build our products. Accell Group wants to continuously create value in a sustainable way. Accell Group improves the quality of their financial returns by limiting ecological impact, doing business in a socially responsible manner and through good governance. And Accell Group takes into account the interests of all their stakeholders. Accell Group is convinced that this will have a positive impact in both the short and long term. The consortium will support Accell Group in furthering these current ESG goals, which are a core element of Accell Group's business strategy. 

What was most complex about this deal?  
The biggest complexity for this transaction was to exceed the 80% tender threshold and subsequently the 95% threshold. This involved winning over a large proportion of shareholders who initially expressed dissatisfaction with the offer. In the end enough shares (96.9%) were obtained to allow a complete delisting of Accell Group. 

Any public to private is complex by nature due to the fact that current financially driven shareholders are being taken out by private equity party without any synergies. In particular for this transaction, the composition of the consortium created a complex dynamic due to the position of Teslin. As other shareholder were offered an exit, whilst Teslin created a position that they, as part of the Consortium, rolled over their stake benefiting therefore of the potential value creation KKR is planning to realise. Although this made the transaction complex towards all shareholders, the benefits of the transaction as a whole outweigh the potential concerns towards the position of Teslin.