Cinven’s DACH (covering Germany, Austria and Switzerland) and Industrials teams had been following TKE for many years as part of their scoping activities for investment opportunities. Over this time, they had built a strong relationship with several stakeholders, including TKE’s parent thyssenkrupp AG, and acquired deep company knowledge. They had noted the company’s strong fundamentals, such as its technical expertise and innovation capabilities, significant recurring revenue component from the service business and high retention levels. The teams also saw the primary carve-out potential to expand servicing further, growth opportunities in launching new products, building on existing sales and for efficiency savings.

 “In the time I’ve been CEO [at TK Elevator (“TKE”)], Cinven and its partners have done everything they can to support me. Their expertise and experience complement mine and we’re naturally all aligned, making my job – to create value – a lot easier,” says Uday Yadav, in post since May 2022.

To secure the deal, Cinven and its co-investors leveraged their experience of successful carve-outs in the industrial sector, the speed at which Cinven and its co-investors could close the transaction compared with strategic buyers, and its good relations with executive and supervisory boards, workers representatives and unions including IG Metall, local advisors and other relevant stakeholders in Germany. The transaction was a further testament to Cinven’s leadership in carve-outs and corporate partnerships in the DACH region, where since 2020 alone Cinven also transacted with Allianz SE, Bayer AG, BlackRock Inc, Generali SpA, Hannover Rück SE, Lonza AG, Santander, Sika AG, and T&D Holdings

“It was a corporate carve-out and the key reasons why we were trusted with the keys of TK Elevator included – besides our attractive economic proposition – speed and transaction certainty as well as our strong relationships with all key stakeholders including the employee representatives,” explains Bruno Schick, Co-Managing Partner and Head of DACH at Cinven. “It was important for the seller to know and trust the investors would do a good job.”

In July 2020, a consortium of investors led by Cinven and Advent, alongside Singapore sovereign wealth fund GIC, the Abu Dhabi Investment Authority (ADIA) and the German RAG Foundation, as well as thyssenkrupp AG who retained a minority in a true partnership approach, signed the €17.2 billion deal.  

At the time of the acquisition, revenues were €7.9 billion and adjusted EBITDA was €1.1 billion. Four years on, these have grown to over €9 billion and €1.5 billion, up more than 15% and 40% in each case respectively. And TKE is well-placed for further growth, with a significantly enhanced senior management team alongside refinements to the go-to-market approach, increased operational efficiency, and a clearer focus on safety and sustainability. Another important growth driver is the new EOX – an innovative, energy & space efficient and digitally native elevator platform based on a belt instead of rope technology competitively priced for the lower-rise segment, developed and launched in record time.

Finally, the new global brand TK Elevator launched post carve-out aimed to preserve the company’s legacy and reputation while positioning it as a more modern, forward-looking player.

Rising to the challenge

The value creation plan for the standalone company at entry had always included growth and increased efficiency. In the aftermath of Covid, TKE was faced with significant headwinds. Material prices spiked, supply chains were disrupted, lead times extended, and interest rates increased, impacting TKE directly as well as the macro environment more broadly (including the construction industry). Specifically for TKE, building sites were closed, meaning fewer new elevators could be installed.

Supported by Cinven’s experienced portfolio team, led by Paul Vega and Stuart Walker, management took steps to support margins and pursue growth.

“In 2022, the new CEO, Uday Yadav, spent his first 100 days holistically assessing the current business. He then looked at where he saw the business developing in the near term and also the longer term,” says Schick. “Uday made it a priority to travel to where TKE’s people and business are — locally at sites and with clients — to truly understand operations on the ground. He saw a transformation opportunity that also includes a strong focus on health and safety.”

Yadav’s plan focused on dealing with the increased cost base, driving digitalisation, improving operational efficiency and developing new products, supported by Cinven’s portfolio team. “His vision and our vision were very well aligned,” says Schick. Key for the implementation was the strengthening of the senior leadership team – including hiring a new CFO, COO, Chief Transformation Officer, Chief Digital Officer and Global Head of Occupational Safety & Health. In addition, strong, new regional management teams were appointed. Moreover, to further develop and establish TKE as a market leader, investments continue into the organization and processes, including into governance. Amongst other appointments, the business is thrilled to have had Philippe Delpech – President & CEO of Sonepar – join the business as Non-Executive Director most recently. Another significant part of the plan was to enhance TKE’s sustainability credentials. Along with moving into a new, sustainably focused headquarters, an experienced Global Head of Occupational Safety & Health was recruited to oversee initiatives helping to create a best-in-class safety culture. TKE is proud that its sustainability efforts since carve-out have been consistently recognised, with renowned accolades and awards.

Increased resilience and growth

The initiatives have paid off and today, TKE is well positioned to capture future growth opportunities, building upon its resilient business model.

One of the big attractions of the investment had been TKE’s recurring income. Elevators are highly regulated and must be regularly serviced. At the time of the deal, more than half of TKE’s sales came from servicing and modernising its installed lifts. The share has increased by 10%-points since the carve-out, further increasing the resilience of the business.

Moreover, TKE’s new digital management platforms now enable predictive maintenance solutions, which make delivery of the services more efficient, improve the customer experience, and reduce maintenance costs.

With the support of its investors, TKE has strengthened its position across all key markets. Sales growth has been strong and margins are now second to best-in-class OTIS, with further upside potential. “As a standalone company and with the support of its investors, we’ve been able to build on TKE’s strong platform and are now well positioned for sustained success in the coming years. It’s time to bring on the next phase in TKE’s evolution,” says Paul Vega, Partner at Cinven.

The next phase

This next phase is already underway as the company recently closed a landmark €160 million joint venture with Alat, a Saudi Public Investment Fund (‘PIF’) company. The partnership establishes the first global elevator and escalator manufacturing hub in the Kingdom of Saudi Arabia, headquartered in Riyadh, with a dedicated product development and training center. As part of the transaction, Alat has also acquired a 15% stake to become a significant long-term shareholder in TKE, joining the existing investor consortium alongside Cinven and Advent. This collaboration not only places TKE in a position to capitalise on one of the fastest growing and most innovative new installation markets globally, but also reinforces TKE’s positioning as a global innovator in urban mobility and a strategic enabler of sustainable development.

“We are privileged to form a game-changing joint venture with Alat to support Kingdom of Saudi Arabia’s vision and power TK Elevator’s future organic growth,” says Yadav. “This partnership marks another important milestone in our transformation journey and represents a new era that underscores TKE’s active participation in the upcoming development supercycle in the Kingdom of Saudi Arabia, while reinforcing our capabilities in building smart cities of the future across the globe. We see strong potential for long-term growth and value creation through this collaboration. To further strengthen this partnership, Ercan Keles — previously CFO of TKE for 12 years — has relocated to the region to lead the joint venture on site. Additionally, we are very pleased to welcome Alat as a direct shareholder and long-term investor in our company and look forward to benefitting from their engagement.”

The deal also confirms the strategic interest for TKE’s existing and new investors, and marks a new chapter for the business: one rooted in strengthened resilience, local manufacturing, digital transformation, and further long-term value creation.