Return of the large LBO

01 July 2008

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Large buyouts seem to have much in common with buses; you wait for one for ages and then two come at once. This is the case this month with the largest deals of the year on the verge of being completed within a week of each other. Both companies are incidentally former Alstom branches which were sold off. The first, Converteam, was bought by Barclays Private Equity only three years ago for around EUR150m and is set to make astounding returns with bids going in at around the EUR2bn mark at auction. In the end Barclays PE seemed to get cold feet and chose to retain a third of the company, sharing the other two thirds in equal parts with the management and new investor LBO France with whom exclusive negotiations have started. Apart from the incredible plus values recorded what is also interesting to note about the deal is the willingness of banks to provide credit for the deal supplying the biggest debt of its kind since the credit crunch hit. LBO France was also involved in the second ex-Alstom company Cegelec, which it acquired in 2006 for EUR1.1bn. Exclusive negotiations have been set up with Qatari Diar, part of the Qatar investment authority, for a deal in the region of EUR1.7bn

Fund raising has again shown no sign of slowing down with yet another big French/European fund closed by AXA Private Equity on EUR1.6bn. HIG has also displayed a bit of flexibility with regards to new market opportunities by closing a $3bn distressed fund. On top of this, both Demeter partners and Aurel NextStage have launched new funds with targets of EUR200m and EUR150m respectively, both of which are aimed at investing and developing companies at the lower end of the French market.

There were a number of investments in public companies this month with opportunities created by the currently low market prices. Newly rebranded Abenex Capital, a private equity house familiar with public investments having staged the first take private deal in France back in 1998, committed to taking a 71.3% stake in listed company Reponse Groupe. Avenir Entreprises for their part took a 28% shareholding in the Tiger Wok restaurant chain.

With fundraising still strong, GPs demonstrating flexibility with their investments in public companies and the two largest LBOs of the year nearing completion, French private equity starts the new quarter on an optimistic high.

Yours sincerely

Francois Rowell

Editor, France unquote"

Tel: +44 20 7004 7524

francois.rowell@incisivemedia.com.