Paris looking to steal London's thunder

Alice Tchernookova
01 November 2016

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France's buyout market overtook the UK in the first half of 2016, in terms of both aggregate value and volume. Alice Tchernookova analyses how the country is taking steps to rapidly capitalise on Britain's post-Brexit uncertainty

Comparing H2 2015 and H1 2016 figures, it appears France is on course to overtake the traditionally busier UK. According to unquote" data, while French buyout activity has been on the rise this year, the UK has regressed.

In France, buyout transactions reached a total of €12bn with an average €166m per deal in H2 2015, with 69 buyouts overall; in 2016, these figures went up to €12.5bn and €180m respectively, with volume reaching 72 deals.

Meanwhile, in the UK, aggregate value slumped from €17.2bn to €7.3bn from one semester to the other, with the number of transactions registering a more modest decline from 77 to 69. Afic president Olivier Millet is confident this upwards trajectory for French buyout activity will continue into the second half of the year.

The AMF is gearing up to work with traditional and ground-breaking firms based in the UK looking to locate some or all of their business in continental Europe to gain access to the single market and the European passport" – Autorité des Marchés Financiers

While the 2017 French presidential election is also likely to bring up a certain degree of latency to dealflow in the first half of next year, as is traditionally the case, the longer-term landscape is unusually clear of interference. Says Millet: "As opposed to 2012 [when newly elected President Francois Hollande designated the world of finance as his "true enemy"], we do not see any hostility coming towards us, or any 'anti-business' wave lying ahead. As a matter of fact, policies and regulations have been rather business-friendly over the past two years."

While it remains to be seen whether dealflow will resist both the pan-European Brexit jitters and the looming 2017 presidential race, this last point is indeed reassuring for a country with a reputation for frequently shooting itself in the foot. A series of new measures put in place by France's financial regulator, Autorité des Marchés Financiers (AMF), do bear witness to the efforts made by regulatory bodies to strengthen and open the country's framework to international investors in a bid to boost the economy.

February 2016 saw the launch of the French Routes & Opportunities Garden (Frog) programme – a working group whose stated mission is to raise the profile and broaden the distribution of French investment funds abroad. This was shortly followed by the relaxing of pre-marketing procedures for French funds in July, again showing the country's will to align its practices with other EU countries and modernise its regulations.

Safe haven
A new component was recently added to this toolbox, but this time aiming to attract inbound attention. Agility is an outreach programme set up to simplify and speed up access to France's financial market for asset management firms and fintech companies. While the measure is not exclusively private-equity- and UK-focused, it is understood that the timing of its introduction post-Brexit was not entirely fortuitous.

The French regulator itself was rather transparent about its intentions in the statement accompanying the launch of the measure: "The AMF is gearing up to work with traditional and ground-breaking firms based in the UK looking to locate some or all of their business in continental Europe to gain access to the single market and the European passport."

Nathalie Duguay, partner and co-head of investment funds at King & Wood Mallesons France, highlights that the programme had been a long time coming and is not entirely opportunistic: "The initiative was, of course, triggered and accelerated by Brexit, but the latter was rather a 'booster shot' than a determining factor, as the programme was already in the AMF's pipeline." A few applications to Agility have already been made, according to Duguay, mostly by large alternative investment firms such as mutual funds.

A key feature of the Agility programme is the so-called 2Week Ticket, through which firms can begin the process of opening offices in France in just two weeks, while the authorisation granting passporting rights giving access to the EU market is issued two months later.

"There is a real shift in mentality," Duguay says. "The recruitment of English-speaking ‘coaches' [who will help applicants understand regulations applying to their planned activities], for example, is a clear proof of that; the general trend is to open up."