Confidence among French buyout players on the rise

José Rojo
12 June 2015

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Optimism among French private equity houses regarding the buyout market is increasing, with 85% of GPs reported to have a confident outlook on the sector, according to a survey by trade body Afic.

Afic polled 45 players in the French market managing 526 portfolio businesses, equating to around 42% the French GP landscape.

When questioned about their propects for the French buyout market, 16% of all GPs stated they felt "very confident". In 2013, when Afic last asked private equity houses this question, no respondent chose this answer.

More than two-thirds (69%) of respondents claimed to be "rather confident", down on the 76% reported in 2013, but more than the 46% recorded in 2012. Overall, 85% of GPs stated they felt optimistic about the buyout sector in 2015.

Conversely, 13% of those surveyed reported a "rather concerned" outlook on buyouts in France. The figure represents a drop from the 22% and 44% of respondents who shared the sentiment in 2013 and 2012, respectively.

The number of players claiming to be "very concerned" about the sector has stayed around the 2% mark since 2013, however, compared with 4% in 2012.

Scepticism about economy still prevalent
In spite of the above, scepticism towards the French economy under François Hollande's administration remains commonplace within the industry. As was the case with the 2009 and 2013 surveys, no respondent felt "very confident" about the French economy in the years to come.

Although a slight uptick was detected within the "rather confident" category, from 28% in 2013 to 31% this year, those feeling "rather concerned" and "very concerned" still represent a combined 69% of all respondents.

The picture improves when the focus shifts to the global economy, with 93% of respondents aligning themselves with the "rather confident" group, up from 79% in 2013.

The survey found an upwards trend in the financial performance of portfolio companies in 2014. Only 0.4% of the 528 portfolio businesses surveyed went under last year – lowest rate since 2010 and a third of the figure observed in 2011, according to Afic.

Additionally, around 88% of the assets surveyed were successful in meeting their debt obligations. The remaining 12%, unable to repay the loans issued at the time of the buyout, refinanced their existing debt either with a fresh equity contribution (5.7% of respondents) or without (4.2% of respondents). However, 2.5% of the businesses polled failed to address their debt obligations.

Afic's survey also highlights the support for buyout transactions within the companies' works councils, with 97.1% either endorsing or feeling neutral towards the acquisition by a private equity firm.