GP Profile: Tikehau Capital

Tikehau Capital has recently been through wholesale structural change. It listed on Euronext Paris with a market cap of €1.5bn in 2017 and subsequently launched its first private equity fund with third-party capital, Tikehau Special Opportunities Fund (which held a first close on €150m in July 2018).

In October 2018, it announced a strategic alliance with former Deutsche Bank division DWS. Each firm agreed to cross-invest in the other's funds, as well as share origination efforts by offering one another co-investment opportunities. The following week, Tikehau announced the acquisition of French private equity firm Ace Management for €6.7m.

The developments are the latest in a long history of diversification by the firm. Today, it has assets under management (AUM) of €14.8bn, of which private debt represents €6.4bn, real estate €2.6bn, liquid strategies €3.6bn and private equity €2.2bn, including €600m through its funds and €1.6bn in direct investments from its balance sheet.

"Tikehau is unique in the French asset management landscape, whether it be in terms of size, strategy or asset classes – not to mention the fact that we are listed," says Peter Cirenza, head of the firm's London office. "There are no French peers following the same path." DWS also follows a niche and specialised strategy, making cooperation between the two a logical way to broaden the offerings of both.

Tikehau launched in 2004 and was the first asset manager to obtain the licence to manage private debt funds in France, kicking off direct lending in 2007. Former Merrill Lynch managers Antoine Flamarion and Mathieu Chabran, who were already familiar with direct lending practises having worked at US firms, pioneered the strategy in the country. The firm started with €4m in AUM, of which 10% came from the founders. Management and employees still hold a 37% stake in Tikehau.

Tikehau is unique among French asset managers, whether it be in terms of size, strategy or asset classes – not to mention the fact that we are listed" – Peter Cirenza, Tikehau Capital

Cirenza says the listing helped the group raise its profile by bringing its four activities under one brand and expand its fundraising base outside Europe. At the time of the listing, there was no capital raise. However, it did raise €702m through a new share issue in July 2017 and a further €300m through a bond issue in November 2017. The new funds were earmarked for further strategic development and the strengthening of its international footprint.

Alongside Tikehau's management, French banks and insurance companies hold shares in the manager, as do Singaporean investment company Temasek (5.4%) and FFP, the listed investment company of the Peugeot family.

Growing into private equity
Raising third-party capital for its private equity funds was seen as a natural evolution by Cirenza, as the firm did the same thing with its private debt funds. Moreover, 2018 saw Tikehau begin a new wave of private equity fundraising, launching Tikehau Growth Equity II (TGE II) and T2 Energy Partners, a fund focusing on mid-market renewable energy companies, in collaboration with French corporate Total.

Tikehau typically backs businesses as a minority shareholder and TGE II follows this approach. The fund invests in small and medium-sized technology, industrial, healthcare and consumer businesses across western Europe, with EBITDA of €5-50m. Even as a minority investor, Tikehau is a hands-on backer: "Aside from the financial support, we provide financial reporting, M&A opportunities assessment and reinforcing management by advising on potential new managers," says Cirenza. "We are also able to provide expert advice on debt arrangements to our portfolio companies."

The 2014 investment in Les Dérivés Résiniques et Terpéniques presents a typical case study of the firm's minority-focused approach. Tikehau injected €40m into the business between 2014 and 2016, before selling part of its stake to Ardian in 2017. The transaction made a capital gain of €153m and Tikehau still owns 12% of the company.

Following the DWS agreement, the firm is looking at ways to broaden its international presence, though it already has offices in Milan, London, Singapore, Seoul, Brussels, Madrid and New York. "We have seen a continuous increase of our international investor base from 16% in 2015 to 32%," says Cirenza. "Ultimately, we are aiming to keep increasing this number with European, Asian and American investors. Our New York office will help us attract LPs based in the US, so they can fully benefit from the renewed global appeal of the eurozone, specifically France."

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