Weekly round-up: French sentiment turns

Sentiment is turning among French private equity players, according to a study conducted by industry body Afic. In 2012, slightly more than half of the private equity professionals surveyed were confident with regards to future activity. But the 109 GPs polled in the second half of 2013 were much more bullish, with that figure rising to 76%. One factor driving increasing confidence could be the improving relations between the business community and president François Hollande's government. "The government's economic policies have evolved considerably over the past 12 months," says Louis Godron, partner at Argos Soditic and chairman of Afic. "The Assises de l'Entrepreneuriat initiative was unprecedented, and many of the decisions made then have been put in practice, with a strong focus on fostering innovation." But will future activity figures validate the renewed optimism?

In recent years, the UK government has launched several initiatives designed to push UK SME exports to non-EU markets, which currently make up 17% of UK SME revenues, compared with 25% in Germany and 30% in Italy. unquote" outlined the challenges UK businesses face in emerging markets, highlighting the advisory role private equity players could provide in helping SMEs navigate new territories. But not all GPs are convinced by emerging markets. In his letter to investors at the end of last year, Terra Firma chairman Guy Hands expressed his reluctance to even look into these markets: "Terra Firma has avoided investing in emerging markets because we cannot get comfortable with the high level of government involvement in the economies of those countries... Without free markets and clear laws, international investors are likely to suffer disproportionately when economic activity goes in a direction the government does not like."

As unitranche lending reaches increasingly heightened levels of activity, its impact on the pricing of hedging products, typically provided by banks, is becoming a cause for concern. unquote" explored the unforeseen problems thrown up by the evolving debt structures.

"Private equity is the poster-child of responsible investment," said HarbourVest's George Anson, chairman of EVCA, at the association's recent Responsible Investment Summit in Brussels. unquote" reported on the shifting political will towards long-term investment and the contradicting strain of regulation that critics say is holding the industry back. "The first thing the EU needs to do is avoid breaking those channels of long-term investment. If we get things like Solvency II wrong, then those existing mechanisms will be damaged. Before we get onto creating these new regimes for long-term investment, the primary message would be: don't damage what we already have," warned Michael Collins, EVCA's public affairs director.

Secondary buyouts peaked in the European market last year, accounting for 40% of all buyouts and 55% of aggregate buyout value, according to unquote" data. SBOs have become a trademark feature of the European landscape, reaching particular prominence in the UK and France. And pass-the-parcel deals are luring in US investors, supplying quality dealflow to transatlantic deal-doers.

That's all from me this week but if you have any comments on this week's analysis, please send your thoughts to amy.king@incisivemedia.com.

You can continue to follow me and the rest of the unquote" team via @unquotenews for all the latest private equity and venture capital updates, and of course on unquote.com.

Amy King
Senior Reporter, unquote"

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