Kick off 2009

01 February 2009

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With deal flow having been effectively reduced to a slow trickle by the end of 2008, it's 2009's turn to stutter it into life. CDC Capital Investissement (CDC CI) signed off on the first and only LBO of the year so far with the purchase of a majority stake in DGF, a producer and distributor of fresh and frozen food products for the bakery sector, valued at under EUR50m and with Societe Generale providing the debt

CDC CI started the year with a statement of intent and will also be announcing another smaller buyout next month. Also on the radar this month is the imminent launch of LBO France's new Hexagone fund, focused on the small-cap buyout market, the sector likely to have the largest amount of buyouts in terms of volume this year.

The Christmas period also saw a shift in focus to the health of GPs' portfolios. The first major sign of portfolio companies struggling are beginning to emerge as annual figures are reviewed with Morgan, the women's clothing brand which is backed by Apax Partners, calling in the administrators after failing to renegotiate its debt, and LBO France-backed Terral, a terracotta company, breaching the covenants on its loan. After announcing a 15.7% fall in turnover, PAI partners' portfolio company Kaufman & Broad took action and rearranged its senior facilities agreement.

In this light it is fair to assume that 2009 will see a conservative deal flow especially in terms of value, with GPs focusing on adapting their current portfolio companies to weather the current economic difficulties where it is needed with the goal of continually adding value. 2009 is shaping up to be a difficult and different year for GPs, their investors and relations between the two.

Yours sincerely,

Francois Rowell

Editor, France unquote"

Tel: +44 20 7004 7524

francois.rowell@incisivemedia.com.