Eurazeo seeks global expansion as industry consolidation intensifies

Backed by a EUR 6bn balance sheet, the firm is looking at targets of various sizes and across its four growth engines: buyout, growth equity, private debt and fund of funds.

“We're one of the leading European players and, potentially, we want to become global,” said Frappier, who also sits as managing partner for Eurazeo’s mid-large buyout strategy. “The two biggest markets now are Europe and the US and [that is] where we will want to look at opportunities.”

Consolidation has become an “essential element” to survival, he said, arguing that small and mid-size players will find it increasingly difficult to compete with their larger peers without the resources to build up their portfolio companies, whether that may be sustainability, digitisation, and internationalisation. This is in addition to the increasingly pricey market, as well as the ever more complex equity stories that a firm needs to deliver.

“This industry is simply consolidating because it needs more capabilities, and you need skills to do that,” he said.

Eurazeo is among many across the financial industry which are looking closely at acquiring private market specialists, he said, noting Franklin Templeton's USD 1.75bn acquisition of Lexington, a secondary funds and co-investments specialist, as a case in point, he said.

“One way [financial institutions] get exposure to alternatives is to go through funds of funds through the likes of Hamilton Lane and Harbourvest, which provide a gateway into private equity,” he said. “Once you start getting into these strategies, the natural next step is to do direct investments.”

Eurazeo, which manages EUR 27bn in AUM, has itself been a product of a series of mergers and acquisitions, most prominently between investment houses Eurafrance and Azeo in the early 2000s. The strategy has since continued apace, including the fund’s 2018 EUR 310m acquisition of peer Idinvest, which managed EUR 9bn in AUM at the time.

Frappier credits the firm’s first mover advantage to consolidate the market to its ability to raise capital publicly.

“Being listed has given us the advantage of a balance sheet that can be used to invest in our different strategies,” he said.

Peers who are only just starting to follow its lead in floating their businesses, in part to seed new strategies whether that may be setting up permanent capital, building new strategies, scaling up existing strategies or acquiring GPs, he said.

CVC and Ardian are among fund houses which are just starting to explore IPO options for their businesses, following a slew of recent listings such as Bridgepoint and Petershill, as reported by Unquote.

Eurazeo’s mid-large strategy, for example, was seeded by the group’s balance sheet during its infancy. And as the strategy grew and a track record built, the firm was able to recover its seed investments by substituting more recent vintages with third party capital. The capital returned was then deployed on seeding other new strategies, he said.

“It's faster to grow the business with third party capital fundraising, as opposed to using your own balance sheet and relying on capital gains,” he said.

The firm announced last month that it raised EUR 5.2bn across its private equity and private debt strategies in 2021, marking a record fundraising year for the GP and an 80% increase versus the amount raised in 2020.

London opening
Speaking at Eurazeo’s newest established office in London just a stone’s throw away from Green Park, Frappier hopes that its newest base will firmly cement its brand and credentials in Europe’s largest financial community.

“Being closer to the financial community – LPs, GPS, lenders, advisors and the whole ecosystem will make our lives easier, and also from a brand building perspective,” he said.

The London office, which has been several years in the making due to delays over Brexit and the pandemic, will be headed by Maxime de Bentzmann, managing director of the buyout team.

Some of group’s venture, growth, real estate, fundraising and marketing team will also eventually settle in the new office, he said, with 22 of 35 expected staff to be rooted in this location by year end.

“Since opening the office, there’s certainly been more attention on us – sellers are reaching out to us and taking us as seriously as other local players,” he said.

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