GP Profile: Astorg

"We are delighted Astorg VII is almost double the size of Astorg VI, which closed on its €2.1bn hard-cap in 2016," says the firm’s CEO and managing partner, Thierry Timsit. "We have also seen around 90% of previous backers recommitting."

Today, Astorg boasts €4bn in assets under management and the firm has an annualised rate of return of 27.5%. The GP invests in European companies valued at €300m-1bn and generating a €100m-1bn turnover. Target companies will typically operate in niche B2B goods or services and will either be pan-European or global, or have a strong potential to become so.

Astorg was established in 1983 as part of the investment arm of the corporation la Compagnie de Suez. However, the 1990s saw several spin-outs of the Suez financial services divisions, while the industrials divisions gained a greater weight, due in part to the merger of Compagnie de Suez and Lyonnaise des Eaux. "Astorg span out from Suez in 1998 and registered the first closing of its first independently managed fund, Astorg II, in that same year," says Timsit.

We have a very strong knowledge of the potential industries that would interest us, as there are not that many, despite our European reach" - Thierry Timsit, Astorg

By the time Astorg III was launched in 2002, the specific B2B-global-niche-leaders strategy was consolidated and it has remained mostly unchanged since. Some of the advantages delivered by this precise strategy include gaining expertise related to these companies’ business models. It also facilitates sourcing, according to Timsit: "We have a very strong knowledge of the potential industries that would interest us, as there are not that many, despite our European reach."

He also underlines a prudent approach in the firm’s strategy: "Investing in global niche leaders means we benefit from both geographic diversification and pricing power, which has allowed us to keep a minimal loss rate of less than 1% of all capital invested." Even portfolio companies of 2007-vintage Astorg IV, which had to navigate the financial crisis years, delivered sufficient returns for the fund to deliver 2x to its LPs on a net basis.

Global vision
Astorg’s investors have always been international: 50% of Astorg II’s backers were French, a figure that fell to between 9-20% in Astorg III and IV, and 9% in Astorg V. Astorg VI, which closed on €2.1bn in 2016, had 20% of its investors hailing from France.

The private equity house initially invested in France-headquartered companies operating on a global scale, with the intention of continuing their international expansion. However, from Astorg IV, the GP also started to invest in businesses headquartered outside France. That fund was 20% invested in non-French European businesses, while that figure was 40% for Astorg V and 60% for Astorg VI.

Nevertheless, Astorg retains strong roots in France and in relation to any potential impact of recent domestic political instability on investor confidence, Timsit says: "The latest developments need to be faced seriously and are alarming. However, in the past, the French market was attractive despite aspects of political instability at times. The economy is altogether robust and the private equity market has reached new heights in the past few years. Hopefully the private equity market will remain largely unaffected."

Today, the GP has offices in Luxembourg, Paris and London, with part of its team based in Frankfurt and Milan, mostly for sourcing purposes. New York may be the next location for the GP, with its seventh generation vehicle able to deploy capital in US healthcare and software deals. At the time of publication, Astorg had just announced the acquisition of a majority stake in Boston-based Anaqua.

Next challenges
Commenting on current high levels of competition and entry multiples, Timsit says: "For several years we have worked on few cases, but with months of preparation, and opted for pre-emptive strikes. We have seen these practices being picked up by more competitors in the past few years." Indeed, 70% of Astorg VI’s deals were sourced in limited competition contexts.

"One of the ways we have found to get around very high prices is to select assets that have very strong potential that still needs to be fully realised. We have adapted to the market, either buying complexity or high cashflows or growth, while always keeping our B2B-global-niche-leaders strategy and shying away from cyclical risk."

Timsit says that, due to Astorg’s roots within Suez and similarly to other large corporates, it has traditionally focused on social responsibility. The firm recently committed to Carbon Initiative IC20, which is led by trade body France Invest, to help GPs monitor the carbon emissions of their portfolio companies. It also recently hired an ESG director, Viviana Occhionorelli. These steps have allowed the GP to outline practical ESG-related goals for its portfolio companies to achieve. With a clear strategy and support in place, Timsit is convinced French private equity can take a lead in terms of ESG practises.

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