AtriA spinout a precursor for 2012?

The two partners left AtriA together in the spring, a departure believed to stem from strategic divergence. The move triggered a key-man clause on AtriA Private Equity Fund III, which closed on €300m in 2006.

New outfit Atlon Capital Partners is currently awaiting formal approval by the French financial regulator, so the maiden fund's finer details are still under wraps. Atlon is believed to be targeting €200m for its first vehicle, which will focus on French businesses valued in the €30-150m range.

"We are in contact with a number of institutional investors, some of which we have known since our previous professional setting - we were introduced to others through our placing agent Axonia Partners," adds de Chassey. "We are aiming to reach first close in the spring of 2012."

Given the current fundraising environment, one could think that launching a first-time, generalist mid-cap vehicle is asking for trouble. De Chassey is certainly not expecting the road ahead to be silky smooth: "We are experiencing two conflicting signals: on the one hand we are really surprised by the very positive feedback we are getting so far. And at the same time the fundraising market has rarely been so tough."

Standing out from the crowd

And tough it is indeed, with a large number of managers competing to attract increasingly selective LPs. Recent research by Investec suggests that eight out of ten GPs are likely to hit the road over the next 12 to 24 months in the UK alone - but the GP community itself predicts that up to a third of those efforts could fail to get off the ground. And judging by market sentiment, the situation could well be the same in other European countries.

De Chassey however believes that Atlon can count on a couple of factors that will help set the fund apart. Its founders' track record is one of them: "We have been in the French lower mid-cap buyout market for 11 years, and we are focusing on financing growing companies exclusively. Our track record is based on 16 transactions, and those companies have on average experienced turnover and profit increases of 10% and 15% per annum respectively. This investment strategy resulted in a gross IRR of 31% over 11 years."

But what about investment strategy, when the market is already thought to be crowded with generalist vehicles? "While overall the market is deemed competitive, and the current macro-economic environment is uncertain, we believe our investment strategy is less sensitive to economic cycles," says de Chassey. "Take for instance a business operating in a new market, usually growing at around 15% per annum: it might go up to 20% in boom years, and might fall back to growth rates of 5% in tough times but nevertheless keep on growing regardless of the environment. This is something that seems hard to achieve in the long run in the large buyout segment, but is doable in the small niches we are focusing on."

Time will tell if this track record and strategy will be enough to woo LPs. In the meantime, Atlon will focus on building its team. "We will be starting with a small team, comprising an investment director and a chargé d'affaire in addition to Edouard Thomazeau and myself. Depending on the results at first close, we will recruit progressively with the aim of ultimately reaching a 10-strong team," explains de Chassey.

Atlon could count on a strong influx of candidates; AtriA is reportedly winding down, and sources in Paris told your correspondent that a handful of other PE houses are due to fold in the coming months. A number of investment professionals are therefore likely to join existing structures, but could also follow Atlon's example and set up new ventures - proof that the oft-discussed industry "shake-up" could turn out to be a prime example of creative destruction.

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• Topics
• Fundraising
• France
• AtriA Capital Partenaires
• Mid-market buyout