Ardian plans North American drive with tech, services deals on radar

The move could see the firm take deployment in the US and Canada to as much as a quarter of its next flagship buyout fund, up from the 10% exposure expected from its incumbent EUR 7.5bn Buyout Fund VII, he said.

“I'm very bullish on the US market,” Basquin said in New York. “This country is the biggest market globally with many trends launched here. It's a strong positive to learn from here and then bring some of these ideas to Europe and vice versa. The US economy is not only very solid, but also extremely independent without relying on external supplies such as energy.”

Within technology, Ardian will focus on software targets with expertise in areas such as industrial usage, while in services it could look at businesses ranging from testing, inspection and certification to education as well as those with a tech-enablement component, he said.

“Technology will remain strong whatever happens with the market correction. We are a growth-oriented investor and we back long term trends,” Basquin said.

US potential targets will generally sit at between EUR 500m and EUR 2bn of enterprise value. The sponsor aims to put in USD 200m in equity cheques, with the potential to strike larger deals via the EUR 1bn budget reserved for co-investments, he said.

The plans will be an expansion from Ardian’s existing presence in the US, which has been concentrated in consumer and healthcare, with portfolio companies such as Angus, an Illinois-based chemicals group with applications in healthcare and life science, among others, and Lake Mary-based food ingredients group Florida Food Products. The two companies alongside bolt-ons made in the country mean that the sponsor’s exposure to US assets is now above the initial 10% planned for North America, he said, noting that LPs are in agreement with the slight shift in its initial strategy.

Inroads to US
Basquin acknowledges the several challenges the Paris-headquartered firm will have to face to conquer the larger and more competitive US market. “A big part of the job I've done with [New York-based managing director] Christopher Sand over the past four years was to contribute towards building the Ardian brand in the US with a view of making sure the brand is perceived as a direct investor, and not just a secondary investor or co-investor,” he said.

Through the Angus and FFP investments, the GP has developed an ecosystem of M&A advisors, and North American private equity firms that now “know who we are and what we're looking for,” he said.

Ardian is keen to emphasise its cross-Atlantic strategy in helping US businesses expand into Europe, he said. “I've spent almost five years here and I am pretty amazed by the number of US upper-mid cap and even large cap PE firms managing USD 5bn-USD 7bn funds with a very small presence in Europe,” he said.

Areas where Ardian believes it has an edge include the food ingredients space, where its European expertise are highly valued given the strict regulation governing food production there, he said. Its experience and understanding of the European market will also come in handy for US companies looking to break into the region, he added.

Investment resumes
After a hiatus in platform investment activity over the past months, Ardian is keen to resume deployment of its 2019 Buyout Fund VII, which has about of one-third in dry powder.

“We decided to pause a bit last summer to see how the various value chains would react and how the debt capital markets would evolve, as well as to look after our portfolio companies,” he said. “We still have quite a lot of dry powder and I'm extremely happy about it as we still have a chunk of equity to deploy in the new paradigm, while the equity we’ve invested prior to the Ukraine war has been very well invested,” he added.

The brief pause means that Ardian has avoided the problem of some of its peers who have invested aggressively over the past two years and are now back on the fundraising trail. “The fundraising environment is tough as we speak,” he said, declining to comment on upcoming fundraising plans for its buyout strategies.

While its hunt for large buyouts has resumed, it continues to focus mostly on bolt-on activities where it has existing financing in place with credit lines negotiated given the difficult debt financing market, he said.

Ardian is also looking at the use of more creative deal structures, noting the wider market trend of minority investment with a few acquiring a majority stake later on in the investment process subject to KPIs and debt market conditions, he said.

Among the main challenges for the sponsor, as well as the wider private equity market, is the cost and availability of debt, which means that valuations have room to drop and allow PE firms and the underlying companies to absorb incremental costs to financing, he said.

He also said that Ardian has a “few ideas” for exits this year but recognises that auction processes are not as certain as they used to be. “There are windows of financing. We have to look for those windows as we look to exiting businesses,” he said. It will also be on the lookout for strategic appetite for its assets, he said.

Among its latest exits in H2 2022 are French CDMO Unither, which was sold to a consortium led by GIC and IK Partners, and joined by existing investors Keensight Capital and Parquest; and Neopharmed Gentili, an Italian pharmaceutical manufacturer, acquired by NB Renaissance with Ardian reinvesting in a stake.

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• Topics
• Buyout
• DACH
• GPs
• Buyouts
• Fundraising
• Ardian (formerly Axa PE)