AFICÂ's LBO White Paper

12 August 2002

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A focus group consisting of industry professionals and intermediaries assembled by AFIC is shortly to publish its LBO White Paper, which assesses the difficulties faced by groups looking to structure buyouts in France, and focuses on how FranceÂ’s buyout market can develop. One of its central recommendations will be that there should be reform in the pension fund system along the lines of the Anglo-Saxon model. This should provide an immediate boost to the French private equity industry, which, according to AFIC, raised only 10% of funds from domestic institutions last year. AFIC recommends that this figure be 25%, a figure which should be easily attainable in view of French institutionsÂ’ proven appetite for the asset class. Research carried out by Initiative Europe and published in The European Fundraising Review 2002, showed that the largest regional group of institutions to have invested in Continental European Funds in 2001 was based in France, providing 18% of the total commitments to Continental European funds.

The report is also likely to encourage the establishment of more funds-of-funds in the region, and will suggest that regulations are eased for insurance companies wishing to invest in private equity funds. Another key proposal is that it should be made simpler for management teams to participate in buyouts, and that there should be clearer guidelines supplied on how profits from a buyout are divided among the parties involved. Aside from this, AFIC has long been arguing for a change in French labour laws which would make it easier to restructure companies.

The next step will be for the group to convince the government that the proposed changes will bring much-needed investment into local industries in France.