French activity: Out of the trough?

Greg Gille
13 June 2012

Tweet
Facebook
LinkedIn
Google plus
Send to

Shored up by an uptick in mid-market buyout activity, French dealflow has shown encouraging signs of recovery in May. But subdued activity in the first months of 2012 and a lack of visibility on macro-economic trends should take their toll on year-end figures.

Sizeable French LBOs resembled the proverbial buses in the second quarter of 2012: you wait for one for an eternity, and then two appear at once. Lion Capital acquired eyewear retailer Alain Afflelou from Bridgepoint, Apax France and Altamir Amboise at the beginning of May in a deal believed to be valued at nearly €800m. A couple of days later, Sagard Private Equity bought discount wholesaler Stokomani from Advent International for around €200m. These two transactions were followed by the €124m Sepur and €150-200m Armatis buyouts at the end of May.

This mid-market uptick came after a disappointing first quarter in the country, with very few transactions breaking the €100m mark. As a result, both the volume and overall value of private equity deals increased substantially in May compared to April. Listed GP Eurazeo also contributed to the value hike by taking part in a €110m capital injection for portfolio company Europcar as part of a wider refinancing, while a VC consortium provided online optician Sensee with a substantial €17.5m funding round.

That said, these early signs of recovery can't hide the fact that French activity has been particularly subdued in 2012 so far. Unquote" recorded 62 deals worth a combined €2.4bn in the first five months of the year - a far cry from the 123 transactions worth an overall €9.3bn completed over the same period last year.

On the ground, local GPs are still lamenting the lack of visibility on macroeconomic trends and company performances, and accessing financing for all but the best deals remains problematic. "From what we see in the market, opportunities are still there. Vendors are still willing to divest, especially those that have delayed processes for several months now," Argos Soditic partner Karel Kroupa told unquote" in May. "That said, everything is more complex: due diligence, financing, negotiations... One has to be really motivated to see a deal through to completion. Processes therefore tend to last longer for all but the very best assets."

Cinven could help ascertain whether May's mid-cap uptick was just a flash in the pan: the GP is understood to be striking a deal with Indigo Capital to buy Prezioso-Technilor, an insulation coatings specialist that posted a €307m turnover last year. But short of a spectacular improvement in dealflow over the coming months, France should struggle to match the €17.4bn worth of transactions recorded for the whole of last year.