Contrasting fundraising fortunes in French mid-market

A trio of French upper mid-market players reached fundraising milestones in the first quarter of 2017, although some of these stalwarts fared better than others.

Apax France had a particularly successful fundraise – the firm closed its latest vehicle, Apax France IX, on €1bn, making it the largest buyout fund raised by a French investor since Ardian's €4.5bn effort in September last year. This latest effort was both a step-up in terms of capital raised for the GP, but also much smoother sailing compared to its predecessor: Apax France VIII closed on €700m in 2011, having launched before Lehman’s collapse in 2008, and with the rough financial climate leading Apax to halt the fundraising effort in 2009.

Apax was nevertheless able to count on the support of investors in Fund VIII and other historical backers for its ninth effort, with 84% of previous investors returning for Fund IX. Altamir, a listed vehicle that has historically backed Apax's funds, notably committed to 30% of the total amount raised (equating to a commitment of up to €306m). The firm also attracted around 20 new LPs. The LP base primarily comprises pension funds, funds-of-funds, insurers and family offices. In terms of geographies, French investors account for nearly half (49%) of the LP base, with 31% from the rest of Europe and 20% hailing from North America.

Quick off the mark
Apax also waited no time in putting the fund to work – or more precisely making use of a bridging facility and sizeable co-investments from its LPs to start investing. The fund is understood to have benefited from a €300m bridge facility provided by Crédit Agricole, which enabled it to finance three deals, all signed last year (InfoVista, Marlink and Sandaya). LPs in the fund co-invested €190m as part of these three transactions. As a result, the fund is already 23% invested and Apax expects it to be fully deployed over the next three to four years.

Sagard is another player that managed to rebound nicely with its latest vehicle. It recently emerged that the GP had amassed a further €300m from 20 LPs for its third buyout fund, Sagard III, doubling its size after reopening for subscriptions last year. Structured as an evergreen fund renewable every year, Sagard III launched in 2013 thanks to a commitment reaching €500m by the firm’s historical family sponsors – Albert Frère via the Bruxelles Lambert group, and Paul Desmarais. The GP decided to reopen the fund for subscriptions in 2016 in order to keep broadening its portfolio over the next four years.

The fund's previous generation, Sagard II, closed on €1.01bn in 2006. However, due to difficulties with the fund’s deployment, it subsequently had to be reduced to €800m in 2010 and got an extension for its investment period. The fund should still bring its investors a return of around 1.7x, according to the GP, with deals including Ceva Sante Animale, Eurodough, Fläkt Woods Group and Stokomani.

Rough road
The road has been rockier for another mid-market veteran, LBO France. The GP finally called it a day for its White Knight IX fund on €450m, some way short of the €1bn it initially intended to raise when it launched in 2013 after a one-year delay. The fund's predecessor, White Knight VIII, was launched in 2008 with a target of €1.2bn. The firm closed the fund in 2009 having raised between €850-900m – a potential top-up to the vehicle was considered in early 2013, with a lack of appetite for that option prompting LBO France to raise fund IX instead.

It is understood LBO France had to overhaul its LP base, as several historical backers did not commit to the fund, despite a string of successful exits in recent months. In December alone, the GP sold Consolis to Bain, Diam to Ardian and most significantly Mont Blanc Materne to trade buyer Bel – a deal on which LBO France is believed to have reaped around 4x money.

A couple of ongoing fundraises could help further ascertain the level of appetite for the French upper mid-market space. According to French publication Capital Finance, Chequers Capital has begun marketing its latest effort, with its sights set on around €1bn. The GP’s previous vehicle, Chequers Capital XVI, closed on €850m in 2011. Should the GP successfully meet that target, it would have nearly doubled its fund size in the space of a decade.

Alpha Private Equity is another long-standing mid-cap GP that should see its latest fund close in the coming months. The firm started raising for Alpha Private Equity Fund 7 in 2016 with a target of up to €1bn, according to unquote" data. Its previous fund had closed on €700m in mid-2012.

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• Topics
• France
• Fundraising
• Top story
• France
• Apax France SA
• Ardian (formerly Axa PE)
• Chequers Capital
• Alpha Associates
• LBO France
• Sagard Private Equity