How flexible funding unlocks growth opportunities
In conversation with Vladimir Lasocki, Managing Director and Co-Head of Carlyle Europe Technology, Mark Brenke, Head of Ardian Private Debt, and Olivier Berment, Head of Ardian global debt fund
Mark Brenke (on the left), Olivier Berment (in the middle) and Vladimir Lasocki (on the right)
Vladimir Lasocki: We’ve looked at a lot of opportunities with Ardian before we worked with them on the refinancing of Evernex and that’s an important point to make at the beginning, because in today’s market we all have to look at five things to get one done, when it used to be three or two. That means you must ask your debt providers to work on things that don’t happen, so the relationship with debt providers is no longer merely transactional, you need to form a mutual understanding and great working relationship with people like Ardian.
Olivier Berment: It’s definitely the relationship that you build up by working together over the years that makes the difference. The point is that it’s our two firms working together that can make a transaction happen. In this case, we saw a good opportunity in Evernex and decided early on to pursue it because it was a deal where our product was a great fit. This deal is a good example of the advantages you get with a private debt facility. It was a straight refinancing of the bank debt that was in place when they bought the company three years ago–so the same quantum on day one, but Carlyle chose to pay more for the debt than before because we could help them execute their growth strategy for Evernex.
V.L.: Choosing a private debt solution was more expensive for us, but the value comes in having more flexibility in the way we execute our growth plans. Fast forward three years from when we bought the company: it had roughly doubled in size and we still had five banks in our banking pool, but we wanted to borrow more money for external growth and we wanted to be more agile, while putting less of a burden on the management in terms of day-to-day relationship management and reporting to the banks.
Mark Brenke: This is where it makes sense to work with a debt provider who has more entrepreneurial DNA. We understand why they want a more flexible arrangement that includes an additional acquisition line, and they understand that this comes at a higher cost than bank funding. But the point is that this way makes it easier for them to execute their strategy.
V.L.: Since we completed the refinancing with Ardian we’ve already bought one company in Brazil and we’ve just bought one in Argentina. Maybe we could have done it with other forms of financing, but the fact of not having to worry about that at all has a lot of value to us. That’s one of the key points from our side–deliverability. That’s what our partnership with Ardian brings: a mindset where the people who make the decisions are relatively close to the people who analyze the opportunities. It’s the exact opposite of the bank market, where the guy who makes the decision, by definition, is sitting far away from the company.
O.B.: I think it’s also important to point out that we’ve evolved our product range over the past few years. Five or six years ago it was mainly higher-priced debt but over time we’ve added lower-risk, lower-return products that are probably more relevant for sponsors like Carlyle Tech, that are more conservative users of debt.
V.L.: I’ve been in this business for 19 years and the type of debt funding we’re talking about here has only been an option for us in three of those 19 years. The fact that people are now offering these products means there’s a way for us to address the issues that we face in a slightly richer valuation environment. We’re in a more competitive world for deals but part of the answer to that has to be that you put more arrows in your bow to go and create that value, through more dynamic buy-and-build strategies in particular. That requires agile capital like we have accessed with Ardian. It’s much more difficult to do with a traditional bank setup.
M.B.: This is a professional market with sophisticated players. If they decide to go with us and take on slightly more expensive funding, it’s because they value the flexibility and agility they get in partnering with a single lender that understands their way of thinking. If you want to go for growth–which is why we provided the acquisition line, after all–you need a partner with the same DNA as you.