GP Profile: Eurazeo

Click here to view a complete profile of Eurazeo, including a comprehensive list of LPs and their individual commitments, as well as up-to-date portfolios, on unquote" data

"In 2002 we became purely a private equity company," says Frans Tieleman of Eurazeo, adding that this key milestone came after the GP had spent the last 70 years as a generic investment company, starting out just after the war.

Its first private equity fund was raised between 2005 and 2006. The decision to focus on PE in 2002 was linked to the arrival of Patrick Sayer as the new CEO. He had been a private equity investor and, as a partner at Lazard in New York, he had seen the rise of private equity in the US first hand.

In 2009, Eurazeo had just 10 portfolio companies and 50 employees, but as of today there are about 40 companies and 120 employees" – Frans Tieleman, Eurazeo

Despite the shift, Eurazeo itself remains an investment company rather than a fund, and it makes most of its investments from its own balance sheet. The hybrid model allows it to combine its own balance sheet investments with third party money, as is the case in its two most recent fundraises. As of today, it has approximately €6bn in assets under management, of which €1bn for third parties.

"In 2009, Eurazeo had just 10 portfolio companies and 50 employees, but as of today there are about 40 companies and 120 employees," says Tieleman of Eurazeo's recent growth.

There are now five investment strands within the private equity focus: Eurazeo Capital was set up in 2002 with a focus on large and mid-cap corporate private equity; Eurazeo PME was set up in 2012 for small- and mid-cap corporate private equity; Eurazeo Patrimoine was set up in 2013 with a focus on real estate private equity; Eurazeo Croissance was set up in 2015 with a focus on growth equity; and Eurazeo Brands was established just a few months ago in June 2017 with a focus on branded consumer and retail private equity. 

Recent fundraises include Eurazeo Capital II which closed on €2bn in January this year, €500m of which came from Eurazeo's outside LP base. The fund is fully deployed in eight deals, the first of which was France-headquartered board game publisher Asmodee in 2014. The investment company then made a final close of Eurazeo PME III on €658m in July 2017 and has deployed money in two deals so far – In'Tech Medical and Smile.

Going global
In terms of offices, whereas once Eurazeo was just based in Paris, it is now in New York as well as having two development offices in Shanghai and San Paolo. Tieleman says geographic expansion is key and that around 80% of portfolio companies grow in more than one country. 

The New York office recently took on added importance when the GP decided to base the recently launched Eurazeo Brands team there, with newly appointed CEO Jill Granoff running the team. Granoff previously led the IPO of listed apparel company Vince.

With some investors deciding to steer clear of the retail market due to volatility, Eurazeo has instead decided to focus on it even more, confident in its success with household and high street names.

Our LP base has changed over the years. When we started investing just in private equity in 2002, we had co-investors. Then in 2006 at the time of our first fund, banks were the LPs, but then that market faded away" – Frans Tieleman, Eurazeo

"The rationale was that we had experience in brands. We used to be a main shareholder in Danone and recently surpassed €1bn in capital gains on our Moncler investment," says Tieleman, "so we feel pretty confident in our experience and success." Other brand experience includes Desigual, Vestiaire Collective and Farfetch.

Between $600-800m has been allocated to Eurazeo Brands from the balance sheet for investments within the retail and consumer sectors to be made over the next five years. The team will particularly focus on investments in beauty, clothing, accessories, homeware, jewellery, leisure, health, fitness and food.

Tickets will vary between $10-100m, with the potential to partner with Eurazeo for investments that exceed $100m.

LP base and returns
"Our LP base has changed over the years," says Tieleman. "When we started investing just in private equity in 2002, we had co-investors. Then in 2006 at the time of our first fund, banks were the LPs, but then that market faded away." He explains that the re-up rate has been high recently, albeit limited relative to the initial LP base given that it was bank-based.

As of today, Eurazeo's LP base is made up of insurance money, family offices and pension funds. LPs are mostly Europe-based but there are also some American and Asian investors. 

The GP aims for 2-2.5x on each deal and at least 20% IRR. The two most recent exits achieved this – with Foncia at 2.4x and Moncler at over 4x. On average Eurazeo has achieved around 2x multiple on exits.

In terms of challenges on the horizon, the GP says investors are much more mature and savvier, as well as being more numerous. However, the flip side of that evolution is that investors are concentrating on fewer relationships and in who they believe in.­­­ 

"Private equity is a well-trodden path, and while 10 years ago it was about negotiating the smart deal, now it is about transforming the company," says Tieleman. "Higher prices and more available debt are not a challenge if you see enough change potential in the company itself."

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