AFIC conference: Industry highlights tough year ahead

AFIC delegate general Hervé Schricke opened the day with much praise for the national private equity landscape, which managed to weather the downturn relatively well compared to its European counterparts: "2010 was a year of recovery, be it for investments, exits, and fundraising. We were able to witness the specificity of the French market when it comes to tough times. In downturns, it doesn't fall quickly as in other European countries," he explains. Schricke however noted that French private equity still had a long way to go before going back to pre-crisis levels.

Chloé Magnier, the AFIC chief economist, indeed painted a sobering picture of the French market. LBOs may have had a bumper year in 2010 - driven by the return of a handful of higher mid-cap transactions - but activity for this segment of the industry is still a far cry from pre-crisis levels. Growth capital didn't witness as big a drop, but venture investments are still struggling to recover and suffered a further 15% decline last year. Fundraising fared quite well in 2010 with a 37% increase on 2009 levels - that said, that year was a historically low point and fundraising remains much tougher than it once was for the majority of GPs.

As is the case in the rest of Europe, French GPs are gearing up to hit the road and raise their next vehicles in 2011 - fundraising strategies therefore featured prominently in the conference program. Although Astorg Partners managed to close its latest fund on €1.05bn in just six months, managing partner Thierry Timsit told participants of LPs' increasingly in-depth and demanding due diligence process: "Be prepared to spend a lot of time answering many in-depth questions about your value-creation strategy and your portfolio's performance."

Echoing Magnier's warnings about the impact of new regulation on LP allocations in French funds - with banks' commitments to the asset class registering an 80% drop between 2008 and 2010 - Timsit noted that Astorg had to deal with a recomposition of its LP base. "We've lost four banks, as well as a number of family offices who have been burnt during the crisis - be prepared to make lots of new contacts," he advises. Mvision indeed confirmed that managers lose around a third of their existing LP base on their new funds, but 3i's Louis Trincano believes that GPs who play their cards right should still meet their targets: "There will be capital for the right teams, with the right product and the right returns."

Transparency and good communication were key words of the day, and not only with regards to LP relations. Schricke urged delegates to consider the bigger picture of PE's public image: "Let us show more transparency, that we are a responsible actor in the economy, so that we can enjoy a good reputation with the government and the unions. We should think hard on how to redesign our relations with all the actors of the industry: LPs - who are more demanding and on the lookout for greater transparency - but also the wider public who could be investing in retail funds, and potential portfolio companies who are not always aware of the benefits of PE support."

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• Topics
• France
• UK / Ireland
• Southern Europe
• Benelux
• Nordics
• DACH
• Industry
• MVision Private Equity Advisers
• Astorg Partners
• 3i
• AFIC