Eurazeo halves deployment and PE fundraising in Q1 amid 'complex and uncertain' environment

Like-for-like (LFL) deployment across Eurazeo's strategies stood at EUR 876m in Q1 2023 versus EUR 1.7bn in Q1 2022, the results revealed. In its flagship private equity segment, equity deployment saw a slowdown with an LFL drop of 36% to EUR 696m. Private debt LFL deployment dropped by 71% to 144m. Real assets LFL dropped by 80% to EUR 29m between the periods, it said.

"We continue to be very selective on investments in complex and uncertain contexts," the co-CEO said. "Let me stress that the lower amount of deployment is totally related to our own policy of being selective and prudent."

The flipside to the slowdown in deployment, however, is the "strong headroom and firepower to grab opportunities in the future", he said, citing its EUR 7.7bn dry powder currently available.

Limited exits
Meanwhile, Eurazeo made "limited" exits amounting to EUR 341m in Q1 2023, which he said is "roughly in line" with last year. In Q1 2022, total exits stood at EUR 433m across its three main strategies, it said.

Exits in its private equity segment dropped by 17% to EUR 217m during the period, while private debt exits dropped by 28% to EUR 119m.

"In a less favourable environment and in a context of rising interest rates, exit volumes and conditions remain satisfactory for high-quality deals in the mid-cap segment, in which the group specialises," he said.

In spite of the challenging environment, Kadouch-Chassaing sees "no reason" why it would not be able to achieve its 15%-20% asset rotation plan for the remaining year.

Eurazeo expects the largest amount of exits to come about in the second half of the year, although Kadouch-Chassaing acknowledges that it is "too early for me to say whether there will be challenges or not".

The GP remains optimistic about trade exits, with corporates generally having a strong balance sheet position and the ability to be just as competitive as PE funds, he said. With its small-mid market strategy exits in particular, direct lenders are still providing liquidity to finance further sponsor buyouts, he added.

Fundraising bright spot
In spite of the drop in PE fundraising, the firm's third-party fundraising efforts held up well overall, increasing 42% year-on-year (excluding Rhône fundraising in Q1 2022) in Q1 2023 to EUR 866m, its results showed. This is in large part thanks to the popularity of its private debt strategies, with fundraising jumping by 4.5x to EUR 512m, its results showed.

Kadouch-Chassaing noted the popularity of the asset class due to its floating rate nature and strong returns. "If you take a 750-800 spread on top of your Euribor, you will find easily that the yield that you can offer today is stronger than the yield you were able to offer a year ago or two years ago," he said.

Across fundraising, the share of international LPs tends to be higher year-on-year as its strategies have become "truly internationalised". Further boosting this is its investment in its fundraising team, particularly beyond its home country, he said.

The co-CEO declined to specify the makeup of its international LPs, although he noted that its strategies have attracted strong institutional investors from the UK, the Middle East and Asia, particularly South Korea.

"[This] is not to say that we are where we want to be," he said. "As you know, we continue to think that we have a potential to win market share in some areas, mainly the US and other countries in Europe, and to some extent, starting with a decent base, in Middle East and Asia."

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