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.

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. 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 largest market segment, low- and mid-rise, 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, the Russia Ukraine conflict erupted, the China construction market declined 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.

From 2022 the leadership team embarked on a multi-year and multi-dimensional holistic transformation program moving at speed. This included major talent and leadership upgrades. This resulted in a step-change in financial performance overtaking two major European competitors and closing the gap to the industry leader. Equally the company posted industry leading organic growth and shifted the mix of its business to the faster growing and higher margin lines of business. This mix shift also also further increased the resilience of the business. 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. This share has increased by 10%-points since the carve-out.

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.

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 very pleased to welcome Alat as a direct shareholder and long-term investor and look forward to benefitting from their engagement.

Amongst other appointments that helped ideally position the company for the next phase, the business is thrilled to have had Philippe Delpech – President & CEO of Sonepar – join the business as Non-Executive Director most recently. 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.