French private equity showing signs of life

Greg Gille
30 May 2013

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Informal chats with local deal-doers might indicate that all-out optimism can still be ruled out, but May saw positive developments taking place in the French private equity space. Greg Gille reports

For starters, a buyout finally came close to breaching the €1bn mark after months of muted activity in the large-cap segment. BC Partners made a $1.3bn offer to Electra Partners for its animal tags business Allflex, following an intense auction process that attracted bids from a dozen private equity firms. BC Partners is rumoured to have outbid fellow GPs Astorg Partners, Bain Capital, Blackstone, Carlyle, Charterhouse, Hellman & Friedman, KKR, Ontario Teachers' Pension Plan, Omers and PAI partners – proof that a handful of French businesses can still turn heads, both at home and abroad.

Bridgepoint followed up with the acquisition of Paris-based sealing solutions business The Flexitallic Group from Eurazeo PME for €450m. Although the company's price tag was not as eye-catching as that of Allflex, the transaction is a further example of the growing importance of alternative debt sources to mid-market dealflow: a €200m unitranche facility to finance the deal was arranged by a club led by the ever reliable Axa Private Equity, according to a source close to the situation.

These two transactions also turned out to be winners for both vendors. Electra notably reaped 15x its money on the sale of Allflex, a multiple seldom seen for European buyouts, let alone French ones. Although lengthy, the 14-year holding period still resulted in a respectable 28% IRR. Flexitallic generated the exact same IRR for Eurazeo, which made 2.9x the equity invested in the business in 2006.

Last but not least, France is gearing up for one of its largest delistings in months. Earlier this week, Axa PE and Fosun International offered to wholly acquire listed holiday resorts group Club Méditerranée alongside the company's management - a take-private would value the business at €556m.

These shining beacons highlight a much brighter picture for the French buyout market in the first few months of 2013 compared with the same period last year. The country was home to 29 transactions worth an overall €2.7bn between January and April this year – more than double the activity recorded over the same period in 2012. France also regained a place of prominence on the European private equity scene, with the second busiest buyout market, hot on the heels of the UK and comfortably outpacing the likes of Germany and Scandinavia.

Homegrown
GPs in fundraising mode might be tempted to ride that wave and hit the road – as did LBO France last month, reportedly resuming its efforts to raise a new €1bn vehicle after a year-long hiatus. May certainly brought further good news on the fundraising front, notably in the debt space: CIC Mezzanine closed its third vehicle on €165m, comfortably exceeding its €120m target, while Idinvest held an interim close on €205m for its new senior debt fund. But these two vehicles attracted almost exclusively French LPs – international investors might still need a bit more convincing before displaying the level of interest witnessed in 2011.