French private equity's 2012 highlights

Greg Gille
08 January 2013

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Last year is likely to be one to remember for French private equity practitioners – but not necessarily for the right reasons. Unquote” looks back on five significant developments that took place in 2012.

Fiscal drama – Election years are traditionally tough for business in France, but 2012 saw fears of a fiscal overhaul having an unprecedented impact on dealflow – or lack thereof. The election of Socialist president François Hollande spelt trouble for entrepreneurs and investors alike, with a raft of planned fiscal measures including steep hikes in exit proceeds and carried interest taxation alike. The end result will not be as devastating as expected, but the drawn-out uncertainty and the various U-turns on several key issues encouraged industry players to batten down the hatches and put off significant moves throughout 2012.

Lacklustre dealflow – 2011 was a very promising year for French private equity, but local players will no doubt be eager to put 2012 behind them as quickly as possible. Dealflow fell by nearly a third year-on-year to settle at 208 deals, while overall value took an even steeper dive at a mere €8.1bn – less than half the previous year's total. France's activity might have been neck-and-neck with the UK's in 2011, but the country had to settle for the third place value-wise in 2012, behind Germany's €12bn's worth of deals.

Tough fundraising – According to figures released by AFIC last October, foreign investors contributed to 27% of the capital raised in the first 10 months of 2012, down from 52% in 2011. The association also warned that for the fourth year in a row, French GPs invested more than they raised, leaving them with very little dry powder, while fundraising figures for the whole of 2012 are likely to settle at a historically low level.

Afflelou and Fives deals – Fiscal uncertainty, financing issues and poor visibility took their toll at the upper end of the market, partly explaining France's disappointing overall value figures. Even though none broke the €1bn mark, a couple of large-cap deals were still transacted at the beginning of the summer. Lion Capital acquired eyewear retailer Alain Afflelou from Bridgepoint, Apax France and Altamir Amboise in a deal believed to be valued at nearly €800m, while AXA Private Equity backed the €850m management buyout of industrial engineering firm Fives Group from Charterhouse.

AXA Private Equity kicks up a gear – Not only did AXA PE secure France's largest buyout of the year, it also did an impressive number of mid-market deals and raised two funds. According to unquote" data, the French GP provided equity in a whopping 17 transactions worth a combined €2.4bn across Europe. And this is just taking equity investments into account – AXA PE's "one-stop shop" approach saw it deploy capital in debt transactions as well as secondaries. The firm also found the time to secure $7.1bn for its secondaries fund-of-funds and $900m for its primary investment fund-of-funds in June. AXE PE's spin-off process is not going along at a similarly breakneck pace though: the GP has been on the block for close to 18 months now.