Idinvest/Eurazeo merger: Going global

Despite having had a successful business model to date, "after seven years it's normal to question yourself on the next move", says Idinvest managing partner Christophe Bavière. "Looking at the biggest GPs' best practices, a strong capital base and diversified LP base are key for growth. This is the direction we've taken."

However, after their recent merger, Idinvest's and Eurazeo's investment committees will continue to operate independently. "It's essential for us, as well as our LP base, that the merger does not involve a change in governance," says Bavière. However, in terms of the specific changes the merger will bring for Idinvest, he says: "We will be supported by Eurazeo's permanent capital, and gain credibility to attract a more international LP base."

It's essential for us, as well as our LP base, that the merger does not involve a change in governance" – Christophe Bavière, Idinvest Partners

Eurazeo, from being an investment company that started out shortly after the war, became a pure private equity company in 2002. Despite the shift, it remained an investment company rather than a fund manager, making most of its investments from its own balance sheet. The Euronext-listed investment company manages AUM of approximately €7bn, of which €1bn is from third parties.

Asked why Eurazeo was identified as a suitable merger opportunity, Bavière points to several reasons: "We have no overlaps, since Idinvest targets the lower end of the market, while Eurazeo works on the upper end. However, the two complementary firms have a lot in common. They both have French roots and international ambition, and aspire to consolidate an even more international LP base and presence abroad."

Talking to Unquote in October, Eurazeo's managing director Frans Tieleman explained that geographic expansion is key, with around 80% of portfolio companies growing in more than one country. In summary, the two GPs share similar roots and goals.

New beginnings
The consolidation marks a new chapter for Idinvest. Founded in 1997 as AGF Private Equity, it used to operate as the PE division of Allianz, until IDI orchestrated its spin-out in 2010. IDI bought 51% of the firm for €27m and gave it its current name.

With almost €7bn in AUM, today Idinvest is a pan-European GP, specialising in growth capital investments for startups, primary and secondary investments in SMEs, mid-market private debt, unitranche, senior loans and subordinated financing. "Our oldest LPs have been mostly French," says Matthieu Baret, partner in the venture & growth capital team of Idinvest. "Some of them are European, but only a few are international. We are beginning a process of internationalisation, and the backing of Eurazeo will help us in gaining credibility in doing so."

Internationalisation is an over-arching theme associated with the merger. The startups and SMEs backed by Idinvest may be born in Europe, but they grow through international acquisitions. "What we always say to the startups and SMEs we back is to start or augment their presence abroad. We need to apply the same strategy to our own business," says Bavière. The GPs' role models are large British GPs based in London that operate as global players. "We want to see more similar stories in continental Europe, which we firmly believe has the potential for this."

Questioned over how the sales process took place, Baret says several options were on the table. "International institutions, asset managers, banks [that are] underdeveloped in terms of alternative assets, private equity and debt strategies and, finally, well-established GPs, offered to partner with us. We opted for the latter."

The merger between Eurazeo and Idinvest is the latest of several consolidation plays between asset managers and GPs to have taken place since the start of 2016 across Europe. Most recently, LGT Capital Partners acquired private debt house European Capital Fund Management from Ares in March 2017, while the following month UK-based asset management firm Schroders acquired Swiss LP Adveq Holding.

Baret explains Idinvest generally has a very good relationship with other kinds of investors, for instance wealth managers. Nonetheless the PE business model has its own specific dynamic and rhythm. "We also thought we would give a much clearer and more convincing image when presenting ourselves as a pure PE group," he says.

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• Topics
• GPs
• France
• France
• IDInvest Partners (AGF Private Equity)
• Eurazeo