Mid-market buyouts dominate French market

12 August 2002

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According to Initiative EuropeÂ’s latest Focus Report, Â‘The Mid-Market Â– A European OverviewÂ’, France, the largest Continental European mid-market, has accounted for an increasing proportion of all mid-market dealflow in Europe since 1997. Mid-market buyouts have also risen in importance in France over that period. In 1997, mid-market deals accounted for 23.86% of FranceÂ’s entire buyout dealflow, but this proportion has risen year-on-year account for almost 65% of all the buyout transactions completed in France in Q1 2002. And although deal volumes in Europe have been falling since 1999, France has seen its relative share of mid-market transactions increase over the same timeframe, from 15.60% in 1999 up to 19.77% in 2001. France saw 177 mid-market buyouts with an aggregate value of EUR 10.9bn over the 1997 to Q1 2002 period, which compares with 1,092 mid-market buyouts with an aggregate value of EUR 71.6bn completed across Europe over the same period.

These statistics add weight to the claim made by many investors that the French mid-market is a desirable arena in which to operate. Large buyouts may have taken the limelight in France over recent months (with the completion of the Elis deal and the pending completion of TDF and Legrand) but with many groups off in pursuit of these larger deals, there is less competition in the mid-market. Anecdotal evidence also suggests that prices have remained more reasonable in this size-range, which is attractive to investors looking for undervalued stocks. Debt packages have also been easier to secure on mid-market transactions, as caution amongst banks has increased where larger deals are concerned. So that while in value terms the mid-market has decreased as a proportion of the entire buyout market across Europe, the opposite is true in France.

France also bucks the trend when it comes to sources of mid-market buyouts. Over the period 1997-Q1 2002 in Europe, the single biggest source of mid-market buyouts was family-owned businesses, which accounted for 35% of all dealflow. In France, on the other hand, by far the largest source was the institutional investor, showing up the continuing popularity of secondary buyouts in the French market. Such deals have accounted for 28% of the volume of the French mid-market since 1997 and 31% of its value. Unsurprisingly, Â‘Old EconomyÂ’ sectors have represented the bulk of mid-market buyout activity, in France as in other areas of Europe.

Non-domestic private equity investors have dominated the provision of equity finance to the French mid-market, with the leading three investors being Barclays Private Equity, 3i and Apax Partners. On the debt side, however, the scenario is different, with local banks such as BNP Paribas, CrÃ©dit Agricole and SociÃ©tÃ© GÃ©nÃ©rale dominating the provision of debt finance, with only Bank of Scotland, Royal Bank of Scotland and Deutsche Bank, representing the Anglo-Saxon institutions amongst the top banks serving the French mid-market.