Carry on up

01 March 2008

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It seems things could be looking up for French private equity. We are only in the early months of 2008, a year which has been roundly touted as likely to be one of the toughest and most testing for the industry for some time, yet there has already been a resurgence of large LBO deals. We must hope that the purchase of retail chain BUT from Kesa Electricals for EUR550m by a consortium consisting of Colony Capital, Goldman Sachs and Merchant Equity Partners; the EUR225m buyout of Etanco by Industri Kapital; and Alpha's purchase of a 70% stake in Frial Groupe is the start of a proper resurgence rather than an anomaly

Following the revelation by Incisive Media-Candover's barometer that the level of buyout deal value in France had dropped to an annual low in Q4 2007 and that France's buyout value has fallen from second in Europe to third behind Germany's, an increase in the large LBO pipeline would be welcome. Should the upcoming months continue to be marked by similar deals, it would be conceivable to hope for a hasty recovery in France's LBO deal volume and value size.

Another highlight this month is the revival of mezzanine funds. Acto completed its final close of Acto Mezzanine FCPR at EUR187m, ahead of its target of EUR150m. Acto, like Argos Expansion last month, will also be dealing in sponsorless mezzanine, a concept which has not fully penetrated the French market. Barclays Private Equity's LBO of Martek Power saw the deal being leveraged via both the usual senior and mezzanine debt; however, the financing was unusual. The EUR12m senior debt provided by CIC Est and the non-refinanced existing debt were both substantially less than the EUR25m mezzanine debt provided by AXA Mezzanine and Euromezzanine.

France may have dropped to its lowest buyout deal volume and value in Q4 2007, but with the recent resurgence in big LBO deals and the GPs demonstrating adaptability in regard to demand and mezzanine investments, there certainly is a vibrant outlook for the market in the coming months.

Yours sincerely

Francois Rowell

Editor, France unquote"

Tel: +44 20 7004 7524

francois.rowell@incisivemedia.com.