The challenge:

Find a partner to double in size.

In 2004, the Faiveley Group, a Euronext-listed company, had the opportunity to acquire SabWabco for its Faiveley Transport subsidiary. SabWabco's business offered a strong fit in terms of both products and geographic market coverage, and the combination would help to make the Group a global leader in onboard railway systems.
The acquisition made sound strategic sense, but the target, SabWabco, was 30% larger than the buyer. The Faiveley Group therefore approached Sagard for support in negotiating and financing the deal.

Specialised in onboard HVAC systems, electro-mechanical systems and electronics, Faiveley Transport was a European leader in each of its product lines. It also had operations in China, the United States and Brazil. As of 31 March 2004, it employed 1,560 people and had €253 million in revenue.
SabWabco, a manufacturer of braking systems, wheels and couplers, was one of Europe's leading suppliers of braking systems for the railway industry. It employed 1,715 people and reported revenues of €325 million in the year ended 31 December 2003.

The transaction:

A minority LBO that enabled the family shareholder to retain its majority interest.

On 17 November 2004, the Faiveley Group and Sagard jointly announced that Faiveley Transport had acquired SabWabco, and that Sagard had taken an equity interest in Faiveley Transport. The €230 million in acquisition debt was calculated to offer a reasonable gearing ratio of 2.7 times EBITDA. The additional financing was raised through a rights issue:

• Sagard invested €101.5 million and acquired a 35.9% stake.
• The management team acquired a significant 2.4% of outstanding shares.
• The founding family retained its majority interest (61.7%) through the listed holding company.

Four years later:

Faiveley Transport is now the world's second largest supplier of onboard railway systems and equipment.

• A successful integration process, completed in two years:
  • Merger of two management teams with different cultures.
  • Deployment of a shared reporting system.

• Exceptional performance:
  • Revenues up 30% over four years
  • EBITDA up 54% over four years
  • Sufficient cash flow generated to pay down the Group’s debt in full
  • 4,540 employees worldwide
  • No. 1 or no. 2 worldwide in every product line
  • Seven acquisitions and two joint ventures in China, carried out with Sagard’s active support
  • Outstanding stock market performance, with the share price quadrupling in four years. In 2008, the company outperformed every other Euronext Paris stock traded under the Deferred Settlement System.

Exit process:

The Faiveley family strengthens its control:

With SabWabco integrated in record time and the business plan objectives met in just four years, Sagard and company management agreed to a full buy-out by the Faiveley family, partially financed by debt and a new rights issue:

• In December 2008, Faiveley SA, the listed holding company controlled by the Faiveley family, purchased all of the minority interests held by Sagard and the management team in its Faiveley Transport subsidiary for cash and shares.
• In February 2009, Sagard sold its Faiveley SA shares on the open market, thereby enhancing the stock’s liquidity.
• Despite the financial crisis that peaked in late 2008, Faiveley arranged bank financing in record time, thanks to its track record of generating cash flow and paying down all of its debt over the LBO period.