Flying the nest: New wave of French spinouts

French banks and insurance companies have been busy carving out their private equity divisions over the past decade. The last week of September saw one of the most high-profile French spin-off processes crossing the finish line as insurer Axa completed the sale of its private equity arm to a management-led consortium for €510m. As reported by unquote" in March, Axa Private Equity's management team and employees, led by long-standing CEO Dominique Sénéquier, will own 46% of the business, with Sénéquier securing 10% of the shares. Axa will retain around a 23% of new entity Ardian.

But this summer has also seen another management team spreading its wings: the BNP Paribas Private Equity (BNP PE) team in charge of direct investments span off its division in July, spawning new firm Isatis Capital. The new entity adds to the number of BNP Paribas investment arms that have been spun out over the years, including Azulis Capital – which is due to start raising a new fund in 2014 – Banexi Ventures Partners, Euromezzanine and Orkos Capital.

"These projects always take time to come to fruition, and we have been working on this for a few years now. It took approximately two years for us to get to completion," explains managing partner Brice Lionnet, who led the buyout of the business alongside Guillaume Lebrun and newcomer Eric Boutchnei. The rest of the eight-strong team entered the shareholding structure shortly after the deal was struck with BNP Paribas.

The direct investments arm of BNP PE started out by focusing exclusively on computer-related technology. It diversified around 2009 and settled on its current strategy by 2011 – foregoing pure venture, focusing on small-cap buyouts and growth capital deals across a variety of sectors. Isatis will continue managing 42 current portfolio companies and around €230m in assets under management across 14 funds, including one FCPR (an LP vehicle sponsored by BNP subsidiary Cardif, now fully invested) and a range of FCPI and FIP retail funds.

Plus ça change
Isatis will stick to its guns in terms of strategy, backing SMEs with revenues of €5-50m, investing equity tickets between €2-8m. Being out of the BNP Paribas family will entail changes when it comes to fundraising. "We have projects to raise institutional funds, and will be able to communicate further on this when we hit the road towards the end of the year," says Lionnet.

"In the short term, we will keep managing the existing funds and launch new retail vehicles, although on the last point we will focus exclusively on FCPI vehicles. We will also be able to market these tax-efficient funds outside of the BNP Paribas network for the first time. That said, we will keep working with BNP as well, something that was agreed as part of the transaction," he says.

Fundraising aside, Lionnet is adamant that being out of captivity will not have a significant impact on the team's modus operandi: "We might have been captive in terms of the capital structure of the business, but we have always been independent in terms of management. All the investment decisions were taken by the managing partners, which is not typical for a banking group's captive private equity arm. We were also completely independent from a sourcing point of view - very little came from the BNP Paribas network."

In keeping with the business-as-usual ethos, Isatis did not let the carve-out process impede deal-doing duties. The team signed its last investment under the BNP PE banner just three days before finalising the spin-off, injecting €2.4m into the MBO of project management consultancy Ispa. This was followed by a €2m growth capital deal and an undisclosed MBO, both signed at the end of August. Isatis is also getting ready to announce four exits, all executed in September.

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