Private equity firms are having to adopt divergent strategies to get a piece of Europe’s hottest M&A deal. Ambition and aggression appears to have the advantage, but it would be foolish to rule out tactical cunning.

Blackstone Group Inc. is teaming up with Carlyle Group LP and a Canadian pension fund — a formidable force combined — in an attempt to buy all of Thyssenkrupp AG’s colossal elevator division. CVC Capital Partners is being less greedy and more creative, backing a rival proposal by Thyssenkrupp’s industrial peer Kone Oyj, which would let CVC pick up assets jettisoned by Kone to assuage trustbusters.

Kone is offering to pay about 17 billion euros ($18.7 billion). The several pitches from private equity consortia including Blackstone’s are under 16 billion euros, Bloomberg News reported on Tuesday. The Finnish company needs to offer a premium to compensate for the comprehensive antitrust investigation that its offer would trigger, which would push out the deal’s completion date and create uncertainty.

Time matters because Thyssenkrupp’s financial situation is strained. Net debt was 4.3 billion euros at the end of its last financial year, the pension deficit was 8.6 billion euros and the group made a yearly loss. Kone’s proposal seeks to cater to the vendor’s needs. It’s not just that the price is higher; there would be an immediate down-payment of several billion euros. Antitrust risk could be mitigated partly by CVC agreeing a side deal for Thyssenkrupp’s European assets.

Kone could go further by committing to buy the business and accept whatever competition remedies were required, even if that meant a forced sale of more assets. Turning any such pledge into a practical reality isn’t so easy. It would be surprising if Kone really was willing to take on such risk, even if there’s a long list of buyout firms fond of these assets. And the more disposals it makes to meet the concerns of regulators, the greater the risk of political opposition for breaking up a German industrial icon.

In short, Kone’s ability to completely eliminate antitrust risk remains a grey area. For now, the higher sticker price is the major advantage over an all-private-equity bid such as Blackstone’s. A buyout would face minimal antitrust hurdles, and the full proceeds would probably come almost as quickly as Kone’s down-payment.

For Thyssenkrupp’s board, it will be tempting to take 16 billion euros upfront rather than, say, 3 billion euros immediately with 14 billion euros down the road. But the 1 billion euros difference is still a lot of money, and it’s possible Kone could go higher.

At 16 to 17 times trailing adjusted Ebitda, the auction has already reached a heady level. But Kone’s potential savings would bring the multiple down. As for Blackstone, its chunky real-estate holdings would help it create value from an elevator business. This auction may have further to run. 

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Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.

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