LBO France defies fundraising climate with hat-trick

While others are cutting fund sizes and holding back from hitting the road with new vehicles, LBO France has taken a far more defiant approach and views the current market as an opportunity. Having just closed its buyout fund White Knight VIII at the end of 2008, the pioneer of French private equity is now set to launch its new small-cap fund Hexagone III and, in addition, plans to launch its first credit fund, Alter cap 1, in May.

While the White Knight fund will concentrate on traditional mid-cap LBOs in the style of its predecessors, new investment vehicle Alter cap 1 will seek to purchase senior debt in solid mid-market French companies at a discount rate and keep the debt until maturity. LBO France has hired a dedicated and senior team to seek investment opportunities in the discounted debt market and put the fund to work. The fund offers LPs annual returns from interest rates on top of the returns generated when the debt reaches maturity. Alter cap 1 will not, however, be used to purchase the debt from LBO France's own portfolio companies.

The positioning of the Hexagone fund on the small-cap market is likely to be attractive to investors since it is a sector of the market where higher returns are still achievable, debt financing continues to be available and multiples were never inflated like the large deals but are still seeing a fall. Furthermore, according to LBO, there is an abundance of dealflow and opportunities for buy-&-build strategies. The firm recently completed the sale of Compin, which it purchased in 2005 via Hexagone I, to Barclays, generating more than 4x money. Compin had seen its sales and EBITDA treble since its acquisition by LBO France, thanks to four acquisitions and a JV in China.

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