France's fresh start

Greg Gille
28 January 2013

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Last year was exceptionally tough for French private equity, hit by the eurozone crisis, double dip recession and a new government that wants to get tough on taxation. However, French GPs are hitting the market with renewed vigour in 2013. Greg Gille reports

Most French private equity practitioners will no doubt be eager to put 2012 behind them as quickly as possible. The protracted fiscal soap opera regarding carried interest and capital gains taxation could have ended much worse than it did for local GPs – but the damage has nevertheless been extensive when looking at buyout activity over the past 12 months.

Luckily, it would seem that French GPs are marching into 2013 with gusto. In fact, 2012 itself ended on a positive note with one of the largest mid-cap deals done in the country in months: PAI partners bought industrial supplies distribution company IPH from Investcorp at the end of December for an estimated €465m. Axa Private Equity is tipped to arrange a €180m unitranche facility to fund the buyout.

Meanwhile January saw other local investors go back to healthier levels of deal-making activity, with Alpha buying clothing brands Vertbaudet and Cyrillus from PPR for a combined €119m price tag, and 21 Centrale Partners grabbing stationery manufacturer Oberthur from TCR Capital. Add to this a handful of smaller MBOs and OBOs, and it becomes clear that many deal-doers remained busy finalising transactions during the festive season.

The venture space shouldn't feel left out though: a trio of tech businesses notably managed to attract substantial rounds in early January. First, CDC Entreprises and Iris Capital provided DelfMems with a $10.5m series-B round of funding alongside other investors. CDC kept its streak going by investing €5m as part of a €10m round for hydrogen storage specialist McPhy Energy. Meanwhile, Iris led a €10m funding round for AppGratis, a Paris-based applications platform for smartphones and tablets.

New kid on the block
Looking ahead, French private equity players will most likely be keeping an eye out for two developments that surfaced in the New Year. Firstly, France might finally see the return of a private equity mega-buyout following a dry spell in 2012: two bidder groups including Axa Private Equity and CDC Infrastructure have reportedly come forward in the sale of Total's gas storage unit Transports Infrastructures Gaz France (TIGF). A deal could value TIGF at €2.5-3bn.

The second significant development could turn out to be more of a curse than a blessing for the local industry: former president Nicolas Sarkozy has been rumoured to be cosying up to investors with a view to launching a €1bn fund based in London. Sarkozy's entourage has been vigorously denying the claims, but in a country where the links between politics and money are under intense public scrutiny, this could put private equity back under the limelight with unprecedented vigour. It remains to be seen whether local practitioners will appreciate the fresh publicity following a tumultuous 2012.