French fundraising: Out in the wild

The matter is serious enough to be considered a top priority for French private equity association AFIC in the coming months: what can be done to boost French fundraising efforts in a particularly challenging market? The association's newly elected chairman Louis Godron told your correspondent we were now way beyond a healthy level of "private equity Darwinism": even the best GPs risk not being able to woo increasingly challenging and/or regulation-bound LPs.

LBO France might be a case in point. One of the oldest private equity firms in France, the mid-market house has been operating for close to 30 years. Although it successfully raised €200m for its debt vehicle earlier this year, the GP just confirmed it had delayed the fundraise of its next buyout vehicle to the end of Q3 – its €1.5bn White Knight IX vehicle was initially set to launch in the first quarter. LBO France might eventually enjoy a speedy, hassle-free and successful fundraise, but this delay speaks to the level of cautiousness currently displayed by GPs on the hunt for commitments, especially at the upper end of the market.

Domestic fund closes have been few and far between in the first half of 2012 and remained firmly on the smaller scale. Unquote" recorded nine first or final closes in the past six months in France, with the most substantial buyout fund close coming courtesy of L Capital's €400m third vehicle. Most of the activity – with regards to both fund closes and launches – has been concentrated on lower mid-market or small-cap efforts. Siparex notably closed a fund and launched another one in quick succession, while Montefiore is looking to reach a first close for its new €180m fund this summer.

Can French GPs buck the trend and successfully navigate a particularly challenging market?

This is, of course, not a purely Gallic issue. But the level of fundraising activity in the country over the past few months stands in stark contrast to the one witnessed over the same period last year. The impressive first half of 2011 was mainly fuelled by a handful of mid-cap closes: Apax France, Chequers Capital and Astorg raised well in excess of €2bn between them, with the latter attracting admiration for closing a €1.05bn vehicle in a little over six months.

Cross the border
Which brings us back to the original question: can this success be replicated, and if so, how? AFIC's Godron is keen to point out that one of the keys lies with foreign LPs. Last year was a turning point in that regard and showed the extent to which local GPs must avoid depending on French institutional investors: foreign LPs contributed to more than 50% of the sums raised in 2011, against a quarter in the previous year. Meanwhile, the contribution from French investors dropped by 20%. If further proof was needed, French LPs only represented 11% of the investor base in Astorg's latest fund.

It is therefore unsurprising that AFIC is keen to increasingly promote France and its private equity industry to international investors. Enticing foreign LPs will definitely prove a challenge in the current environment, though: LBO France is understood to have postponed its fundraise notably due to the difficulty of promoting Euro-denominated vehicles to North-American LPs. France might look attractive based on its promising business projects and the performance of its GPs, but investors could be forgiven for thinking twice about betting on Europe at the moment.

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• Topics
• France
• Fundraising
• France
• LBO France
• AFIC
• Astorg Partners