XAnge/Siparex merger highlights consolidation trend in French PE

Greg Gille
21 May 2015

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The French private equity market – and the venture/growth capital space in particular – is routinely viewed as particularly fragmented. Greg Gille looks at how the recently announced XAnge/Siparex merger fits in a wider context of increased consolidation

One of the oldest houses in France, Siparex, made a move towards consolidation at the beginning of May, striking a deal to buy a majority stake in venture capital firm XAnge Private Equity.

Siparex will acquire its majority stake from current majority shareholder La Banque Postale. The vendor's parent, the La Poste Group, will reinvest to secure a 20% stake. The process, which was managed by Rothschild on behalf of La Banque Postale, is understood to have involved a limited number of potential buyers.

Founded in the late 1970s, Siparex currently has €1.2bn in assets under management. It operates across France and also maintains a presence in Spain and Italy. The GP held a final close for its MidMarket III vehicle on €200m, exceeding its €150m target, in February last year. The GP had launched the vehicle in June 2012, days after closing its MidCap II vehicle on €130m.

Established in 2004 by former Afic chairman Hervé Schricke, XAnge has offices in France and Germany. It focuses on innovation financing and growth capital for SMEs via a range of institutional and retail funds. The firm employs a team of 15 people.

The merger is expected to go through in Q3 this year, pending approval by the relevant regulatory bodies. The deal will enable Siparex to expand its reach towards early-stage financing through the XAnge brand, while the core Siparex business will continue to focus on mid-market and regional investments. The resulting group will have a combined €1.5bn in assets under management.

"We knew the XAnge team prior to the transaction, and our activities are complementary," explains Siparex CEO Bertrand Rambaud (pictured). "Although we were already present in the venture space, XAnge is a strong brand in that area, and they are really well regarded. We will look to build our venture offering under this banner."

Unfinished business
One of the steps in this strategy will be to complete fundraising for the XPansion 2 growth capital vehicle, which stalled after having raised €32m at first close in 2013. In July last year, XAnge held a final close for its XAnge Capital 2 fund on €62m, surpassing its €60m target. The vehicle is the second from XAnge to focus solely on the digital economy. According to Rambaud, fundraising for the third vehicle in the XAnge Capital family is likely to start in 2016, once the merger is fully effective.

Although the two brands will continue to co-exist, XAnge's incorporation into the Siparex group will involve some degree of consolidation for activities that do overlap – notably in the growth capital space – something that Rambaud expects to take place before the end of this year.

Beyond the diversification strategy, another motive behind Siparex's interest in picking up XAnge is to gain access to the significant financial clout of La Poste. The group is already an LP in XAnge funds, and will remain invested in these vehicles following the merger.

Come together
Several mergers in the past few years have been seen as crucial steps in consolidating the French private equity space. ACG Private Equity has been particularly busy, most recently buying Acto Mezzanine and fund-of-funds Quartilium – the remaining entities of Groupama Private Equity – in early 2013. The group also bought French secondary investment firm BEX Capital in June 2012, following the acquisition of both Viveris Management and Gimar Capital Investissement in 2011.

Fondations Capital, meanwhile, acquired fellow French GP LBO Partners from CM-CIC Capital Finance, the private equity arm of the Crédit Mutuel-CIC banking group, in 2013. Back in late 2011, troubled mid-cap GP Atria Capital Partenaires merged with counterpart Naxicap.

But it is in the venture/growth space where the landscape is expected to change the most in the coming years. State investment arm BPI France, which has become a cornerstone of fundraising efforts for French venture and growth capital managers, has called for more consolidation in the space. The LP is also expected to support this view by actively focusing its investments on existing managers rather than backing new teams.