PAI reaches halfway line with €1.4bn first close

Greg Gille
14 January 2014

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French private equity house PAI partners is understood to be halfway towards the hard-cap of its latest vehicle, PAI Europe VI.

The buyout house, which hails from France but invests across Europe, has so far attracted €1.4bn in commitments and can start investing from the fund, according to a source close to the situation. The fund is believed to have a €3bn hard-cap.

The firm declined to comment on fundraising for the time being.

Back in October last year, PAI chairman and CEO Lionel Zinsou stated that the fundraise was going according to plan, with more than €1bn in commitments already received at the start of Q3 2013. Zinsou added that he had been surprised by the appetite displayed by insurers and banks.

The firm began fundraising in the spring last year after an intense pre-marketing effort. PAI had raised €5.4bn for the fund's predecessor in 2008, but internal controversy sparked by the arrival of Zinsou resulted in the departure of key partners Bertrand Meunier and Dominique Mégret.

This triggered a key-man clause on the 2008 fund, which was ultimately halved to €2.7bn. In the end, extra concessions on fees and corporate governance swayed two-thirds of investors in the fund to support the restructuring and to restart the shrunken fund, according to unquote" coverage at the time. The percentage of investor votes required to terminate the vehicle was lowered from 80% to 60%. Additionally, PAI was said at the time to have agreed to pass on 100% of fees to LPs, with the exception of its management fee.

PAI has since then been on the mend and has taken advantage of improved conditions in 2011 to kickstart a hefty divestment effort, returning in excess of €5bn to investors over the past two years. These exits included the sale of Kwik-Fit to Japanese trade buyer Itochu for £637m, followed by the divestment of Yoplait, which generated a 10x money return. The buyout house then sold French mortgage insurance services company Compagnie Européenne de Prévoyance to JC Flowers for around €850m, reaping a hefty 16x multiple.

Overall, PAI's divestments since 2011 have yielded a 3.7x multiple of capital contributed and a 34% IRR for its LPs.

Zinsou is to step down in 2015 as the private equity house draws up its succession plans. Current chief investment officer Michel Paris will become chief executive, while Zinsou will join the firm's supervisory board before he retires in 2017.

Investors
PAI is understood to have attracted significant interest from US investors with this latest effort – perhaps a sign that North American LPs are increasingly warming to European private equity opportunities.

Investors in previous PAI funds that chose to re-up in this latest effort have increased their commitments by 30% on average.

Investments
Although details have not emerged at this point, PAI is likely to follow its usual strategy when it comes to deploying the new fund. The GP aims to take controlling stakes in LBOs across Europe, with a specific focus on the mid- to large-cap markets. PAI is particularly focused on transactions in excess of €300m, investing equity tickets in the €100-300m range.

The 2008 fund is now fully invested – the new vehicle's first close will allow PAI to resume its investment activity.

People
Lionel Zinsou is the chairman and CEO of PAI.