French dealflow picks up in pre-summer rush

France might have had to wait a little longer than its European neighbours, but the country has finally been home to a mega-deal comparable to those seen in markets such as the UK and Germany. Apollo agreed to buy Verallia, a division of French construction group Saint Gobain, for an enterprise value of €2.9bn in early June. The deal came at the end of a particularly competitive process, which is believed to have also included GPs such as CVC Capital Partners, Ardian and Blackstone.

The transaction is expected to complete by the end of 2015 and would be the largest French private equity buyout since the onset of the financial crisis – surpassing the €2.1bn SBO of Spie by Clayton Dubilier & Rice in 2011. Prior to the Verallia deal, the last French LBO to break the €1bn enterprise value mark was that of Labco, inked by Cinven in May 2015 for €1.2bn.

While the enterprise value of Verallia would have been enough to make headlines, the transaction also adds to the growing dealflow in the French mid-market in recent months. Private equity activity in the €100m+ segment has been rising steadily, according to unquote" statistics, from just two deals announced in Q4 last year to six in Q1 2015 and 10 in the second quarter. Other notable buyouts in Q2 included the SBO of Vacalians by Permira, which is understood to have valued the business at €400m, as well as the €1.2bn acquisition of Labco by Cinven.

While secondary buyouts have been prominent as GPs on both the buy and sell sides rush to beat the traditional summer lull, a few notable assets have left private equity hands in recent weeks. The aforementioned Spie, for instance, listed in a €2.5bn IPO on Euronext Paris at the beginning of June. LBO France, meanwhile, sold two subsidiaries of Cityvision to the Paris transportation agency, RATP, and is expecting to divest further divisions in Q3.

Busy pipeline
There are also signs that this activity could be sustained in the coming weeks before the inevitable summer lull sets in, especially at the upper end of the market. Word on the street is that Apax Partners has emerged victorious from the auction for Airbus's Vizada, which could have fetched a valuation in the region of €400m. The rumoured buyer wouldn't go in blind though, as it previously held the asset between 2006-2011. Blackstone is also rumoured to be close to a sale of clinics group Vitalia to CVC's Vedici, which could value the business at up to €1bn.

This busy pipeline was neatly reflected in a confidence survey by trade body Afic released last month: optimism among French private equity houses regarding the buyout market is increasing, with 85% of GPs reported to have an assured outlook on the sector. More specifically, 16% of all GPs stated they felt "very confident" about the buyout market – in 2013, when Afic last surveyed GPs, no respondent chose this answer.

Meanwhile, more than two-thirds (69%) of respondents claimed to be "rather confident", while 13% of those surveyed reported a "rather concerned" outlook on buyouts in France. The latter figure represents a drop from the 22% and 44% of respondents who shared the sentiment in 2013 and 2012, respectively. The number of players claiming to be "very concerned" about the sector has remained around the 2% mark since 2013, compared with 4% in 2012.

While current dealflow prospects and GP confidence paint a rather rosy picture, several clouds are still threatening to spoil the party. For starters, scepticism when it comes to the health of the French economy remains widespread within the industry: no respondent to the Afic survey felt "very confident" about the French economy in the years to come, as was the case in the 2009 and 2013 polls. Those feeling "rather concerned" and "very concerned" still represent a combined 69% of all respondents.

Although French deal-doers felt bullish about the state of the global economy when the Afic survey was conducted around two months ago, it remains to be seen how the renewed Grexit drama will weigh on M&A activity, particularly where overseas players are concerned.

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• Topics
• France
• Investments
• France
• AFIC
• Unq2015July