Hs 2009 Reduit

P Special Issue • ENGLISH EDITION EACH MONTH • LE JOURNAL DES PROFESSIONNELS DU CAPITAL INVESTISSEMENT

INFRASTRUCTURE Infrastructure funds now become the new drink of choice for investors. Its stable profitability combined with its social benefits make it a much valued asset class. > p. 22

CAREERS The current crisis might change the private equity model, with a knock-on effect on the profile of teams within the sector. Will this strategic shift be made with the same people? > p. 16

Christine Lagarde, France finance minister, oversaw a lot of public initiatives to support investment such as FSI.

DEAL STORIES World Freight Company, Micromania, Buffalo Grill, METabolic EXplorer. > p. 26

L’ÉTAT, the Almighty

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French Small & Mid Cap LBO Specialist

Human Resources Communication Agency

Call center

IT Services

Sales

Sales

Sales

40 M€

90 M€

123 M€

October 2008

September 2007

July 2007

Design and distribution of women clothing

Polymer distribution

DIY Products Distribution

Sales

Sales

Sales

72 M€

243 M€

61 M€

July 2007

July 2007

January 2006

Manufacturing of private label savoury snacks

Manufacturing and distribution of concrete moulding equipment and safety platforms for building sites

Design and distribution of household linen

Investment : September 2006 Divestment : January 2009

Investment : October 2005 Divestment : September 2007

Investment : May 2005 Divestment : October 2007

4 years, 9 LBOs, 3 exits. CIC LBO Partners’ team is pleased to announce the successful launch of CIC LBO Fund II bringing funds under management to over 300 M€.

S TABLE OF CONTENTS

TALKING

ABOUT

39

Afic

6, 18

AGF PE

5, 40

Altamir Amboise

6

Alvedis

16

Alven Capital

4, 40

Antin Infrastructure

24

Apax Partners

6, 38

Arsène Taxand

16

AtriA

16

Axa Infrastructure

23

Axa PE

5,19

Azulis Capital

34

Banexi CP

38

Barclays PE

38

BNPP Développement

38

Campbell Luytens

22

CAPE Capzanine CDC Innovation CDC Céréa Mezzanine

38

5

16 22

Equalis Capitam

19

Eurazeo

4

Evolem

38 8

Gide Loyrette Nouel

24

GIMV

38

Global PE

22

Grant Thorton

24

Innoven Investors in PE

7 26

iXEN

38

L Capital LBO Managers

16 28, 39

Linklaters

23

Mayer Brown

24

MBO Partnenaires

38

Méridiam

22

Natixis PE

10

FRENCH MARKET

16

TREND

The strategic investment fund, an “informed investor”

8

All the Private Equity Magazine league tables for 2008

Careers: profiles transformed

18

FOCUS

26

DEAL’S STORY

10

Sharing of value: who actually benefits from LBOs? Infrastructures funds: building their future

Worldfreight a particularly rapid build-up L Capital plays to win with Micromania Colony putting real estate on the menu for Buffalo Grill METabolic EXplorer shakes up the chemicals world

34

strategy

36

FUNDRAISINGS, DEALS AND EXITS TABLES

18

Clear horizon for Azulis Capital

22

A selection of the main fundraisings (current), deals or exits in France.

42

BUSINESS RESTAURANTS

4

OFI AM

23

Ophiliam

6

OTC AM

40

PAI

TIMES, THEY ARE CHANGING… Are they really? Admittedly, the

Philippe Nguyen, a career hitting all the right notes

INTERVIEW

20

Franck Caron, Editor.

AXA Private Equity committed to responsible investment

8

6 40

IPE Korn Ferry

PORTRAIT

32, 40

Cube Infrastructure

IDI

7

39 30

FSI

NEWS FROM FRANCE

19, 38

Colony Capital CT Partners

4

4 38, 40

CIC Mezzanine Crédit Agricole PE

| EDITORIAL B

40

Abenex Capital

M. Osti

A Plus Finance

era of recaps, debt multiple above 7 and exits after 16 months with splendid returns is over. But despite numerous talks about things being different in the future and the business of finance radically transformed, it is less than certain that a revolution is on its way. Indeed, the crisis has brought back the governements at the frontstage all over the world. In France, it never really left it… But faced with the scale of the crisis, it took numerous initiatives to provide new capital and financing to struggling companies. It also took a strong position on new regulations if necessary… As far as the private equity industry is concerned, the horn was not yet sounded to hound the funds out although a clear distinction was made by some officials between the “good”private equity, namely venture and expansion capital and the bad Lbo. And the issue of Lbo debt is seen by some political leaders as the next “subprime”. So far, the various actors involved managed to find some solutions to avoid any large bankruptcy that would make the headlines of newspapers. Uncertainty is the key word. But as soon as the first signs of recovery will be seen, the market will reopen. Changed completely? It remains to be seen…

42

5

Permira

16

Pragma Capital

38

Seventure

40

www.pemagazine.fr

UI Gestion

4

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Yam Invest

4

© Photo de couverture : Sebastiao Moreira/epa/Corbis - Illustration page 18 : © Christian Roux - Photo page 22 : ©Martial Couderette

Société Générale CIB

6

Sofimac

5

Sofinnova Partners Tim UFG PE

40 4 38

Dépôt légal à parution - N° de commission paritaire: 0210K85732 - N° ISSN: 1771-3706 - Private Equity Magazine est édité par SARL Lipari Presse, RCS Paris B 478 182 710 - Prix au numéro: 150 euros, 10 numéros par an + hors-séries - Ce numéro est un supplément hors-série du numéro 47 daté de Juillet/Août 2009.

| Special Issue | August 2009 | PRIVATE EQUITY MAGAZINE

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NEWS FROM FRANCE

EXPRESS… EXPRESS…

Tikehau Investment Management (TIM) has been accredited by the French securities regulator (AMF) for managing securitisation vehicles (FCT) and contractual UCITS, allowing it to acquire bank debt. With this new vehicle, which is targeting around 100 million euros, TIM is adopting an opportunistic approach aimed at identifying pricing imbalances on the corporate debt or senior LBO debt market, while steering clear of distressed debt.In addition, Tikehau Investment Mezzanine closed its mezzanine fund in February this year for 60 M€. Eurazeo’s revenues dropped 8% over the first half of 2009, at 1 811 M€. The results, a net loss of 120,9 M€, were impacted by the absence of capital gains, the loss of value in investment properties and the negative impact of the economic environment on Europcar and the decline in results of equity affiliates, Rexel and Accor.

Crédit Agricole Private Equity is launching its LBO and development business in Italy with the arrival of Stefano Zavattaro, the former managing director of Sigefi Italia Private Equity (Siparex Group). Operational in 2009, with an investment capacity of 100 million euros, this activity will take up majority or minority interests in the capital of Italian companies (LBOs, OBOs, development capital deals, etc.) in the middle market segment.

Yam Invest, an investment company grouping various family offices together, is launching TIME investors, which is intended to take up interests in mid-size European businesses in the Telecoms, Internet, Media and Entertainment sectors. The TIME team is led by Henri de Bodinat, former vice-chairman of Arthur D.Little. The strategy will involve investing in tickets from 5 to 20 million euros, alone or on a co-investment basis to accompany, as the majority shareholder, growth projects for businesses with revenues of between 5 and 100 M€, on its areas of expertise.

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JUNE. NO.46

First closing of the “FCPR fund” M.I 5 at 50 million euros aunched in autumn 2008, M.I 5, UI Gestion’s fifth fund dédicated to small and midcaps deals, has raised 50 million in commitments for its first closing. The final target is still 100 million euros. Eligible for the “France Investissement” label like M.I 4, the fund has been subscribed for by CDC Entreprises for 11 million and Dahlia Partners (backed by Natixis PE) for 5 million. Other institutional players, such as Predica and Crédit Mutuel, which were already on board for the previous vehicle, have once again confirmed their confidence. Around 20% of the total is also made up of commitments by individual investors,

secretary. M.I 5’s investment strategy is the same as its predecessors: development capital deals and small handovers in SMEs with between 10 and 60 million in revenues and an average EBIT of 1.5 million. On minority or majority deals alongside business owners, it aims to carry out around five

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APRIL. NO.44 Aymeric Balmont, UI Gestion

“including the previous business leaders who sold off their company or have been backed by UI Gestion and want to continue in the business”, explains Aymeric Balmont, UI Gestion’s company

JUNE. NO.46

Alven Capital focused on e-commerce and mobility W

ith its 100 million euro fund, Alven III, raised at the cycle high at end 2007, only 10 million of which were invested in 2008, Alven Capital is still well armed to capitalise on opportunities triggered by the crisis. The venture capital mutual fund does not intend to depart from the good performances achieved on the previous funds. Alven II, maturing in

Charles Letourneur, Alven Capital

PRIVATE EQUITY MAGAZINE | August 2009 | Special Issue |

operations a year, with an average ticket of 5 million euros, invested in businesses that generally have ambitions for external growth. With around 85% invested, M.I 4 (86 million euros raised in 2006), has already carried out two trade exits on Trialis and Euroflash, generating an IRR of 40%.

2012, currently has an IRR of 20% thanks in particular to multiples of over 20 on Seloger and Webhelp, offsetting the drop in valuations for 12 lines still in the portfolio (affected by the fair market value). True to its preferred sectors, e-commerce and mobility, the management company created in 2000 by Guillaume Aubin and Charles Letourneur sets aside 5% of its fund for a seed section, which detects gems as soon as they are created. “At the height of the crisis in 2001, we saw major web leaders emerge, such as Meetic or Ventes Privées. Today, we are trying to spot the successes for after the crisis”, highlights Charles Letourneur. Even if this means looking outside of France, as for eBoutic.ch, the Swiss clone of Ventes Privées.

Natixis Private Equity: sharp drop in earnings for 2008 N atixis Private Equity has painted a subdued picture of its business for 2008. Despite the clear improvement in the amount of capital gains realised (disposals of Maisons du Monde, Aerocan, Fondis Electronic, Melvita, Vista-print, etc.), up to 272 M€ from the 189 million euros recorded in 2007, consolidated net income has contracted sharply, dropping from 253 M€ to 12 M€, with the combined impact of provisions and the reduction in the stock of unrealised capital gains. The decline in business on certain equity interests, particularly marked during the fourth quarter, led NPE to increase the level of its provisions sevenfold from 2007 to 2008, from 21 to 142 million euros. The victims include the lingerie company Barbara, which has filed for bankruptcy, and the packaging bag manufacturer Emballys Alplast, in receivership, two investments made by Providente, the dedicated turnaround subsidiary which NPE announced it was shutting down. As far as unrealised capital gains are concerned, after climbing 182 million euros in 2007, they contracted by 70 million euros

in 2008, dropping from 345 to 267 million euros, representing 21% of the net book value, they have dropped from 345 to 267 million eu-

Pierre Hervé, Natixis PE

ros, at 21% of the net value of the capital invested. “We have adopted a very conservative valuation of our equity interests, with an average EBITDA multiple of 6.3”, explains Pierre Hervé, company secretary. Who highlights the limited impact of the crisis at the end of 2008 on Natixis Private Equity’s portfolio in France, with only 13% of it affected, in the automotive, real estate, textiles and mass retail sectors. In any case, the investor once again recorded a good level of business in 2008: 778 million euros invested in 190 businesses, representing an increase of 26% compared with 2008, higher than the level of capital managed.

NEWS FROM FRANCE B JULY-AUGUST. NO.47

MAY. NO.45

AXA Private Equity committed to responsible investment

CIC Mezzanine: closing above target

y signing up for the United Nations Principles for Responsible Investment, AXA Private Equity is sending out a strong message to the industry. With this step, the investor is joining the ranks of the 33 private equity firms (including five French companies) which had taken this step at the end of June 2009. “We are committed to implementing the actions required in relation to our staff, our investors and the companies in our portfolio, not only for ethical reasons, but also because we believe that this will have a positive impact on the growth of the companies in which we are shareholders”, confirms Dominique Senequier, chair-

IC Mezzanine has announced the closing of its second fund at 107 million euros. The team led by François Petit has come in comfortably higher than the 100 million euro target it had set itself when the fund was launched at the start of last year. CIC is performing its role as a sponsor, contributing one third of allocations, with the balance subscribed for by funds of funds, insurance company banks and even family offices, all exclusively French. CIC Mezzanine 2 has already been invested for 40 million euros on around 10 deals, with target stakes ranging from 3 to 15 million euros, on SMEs valued at between

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Sofimac: a new venture capital fund acked by CDC Entreprises, its long-standing sponsor, Sofimac Partners is launching Technologies et Santé 1, a dedicated venture capital “FCPR fund” for young biomedical technology firms. The vehicle, targeting 40 M€ , will invest an average ticket of 1.5 M€ in five French and Italian companies each year. Indeed, Sofimac’s presence in northern Italy since 2007 has enabled it to develop local market expertise and relations with Italian institutional players. In this way, an Italian investor close to Lombardy’s Italian banks has subscribed for the new venture capital mutual fund. The final closing is expected for the end of the year. Technologies et Santé 1 has already made a first investment in ImmunID, with a 2.4 M€ pool also involving Vizille Capital Innovation and CEA Investissement. The Grenoble-based company is specialised in immune repertoire diagnosis, with this technology making it possible to very rapidly measure a patient's level of infectious risk or the impact of medicine.

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man of AXA Private Equity’s management board at the responsible investment and private equity conference held on July 7, 2009 with Novethic.

Dominique Senequier, Axa PE

This also represented an opportunity to present a study carried out with 300 French management companies on this issue, revealing a gap between the industry's declared interest in environmental, social and governance (ESG) criteria and their weak implementation in practice. While two thirds of those polled said that they take ESG criteria into consideration, the tools for setting up extra-financial analysis are still very undeveloped. Without any structured information or tools, 86% of managers give priority to direct dialogue with the businesses on these subjects. 47% of them only use this type of method.

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JUNE. NO.46

Monier: PAI hands the keys back to the lenders P

AI is finally going to sell off its 65% stake in Monier (formerly Lafarge Roofing) to the group's lenders. The committee representing the various creditors (including BNP, GE Capital, RBS and Société Générale) rejected the investment fund's proposal to plough 150 million euros back into the business and keep 40% of the capital. In the wake of this, the steering committee had to present a plan to

all 140 lenders aimed at cutting Monier’s Debt (1.9 billion euros) by around 50%, taking it down to nearly one billion euros, and planning to award it 150 million euros in new credit lines in return for the allocation of the capital to the institutions holding the main debt, prorated to their interest. In a statement released to the French news agency, PAI announced that its loss in Monier came to 250 million

euros, representing 2% of its capital. The group, which has not yet officially breached its covenants, is unable to honour the interest payments on its LBO debt due on June 30. Hit by the real estate and building crisis, Monier is still one of the leaders on its market, with 1.35 billion euros in revenues and EBITDA expected to reach 110 million in 2009, compared with 190 million in 2008.

François Petit, CEO of CIC Mezzanine

20 and 100 million. The agrifood company Martine Spécialités, the property and casualty insurance expert Texa and the artificial hip and knee specialist Amplitude represent some of the latest deals carried out by the mezzanine fund. “Despite a deal flow that has been halved on leveraged buyout deals for handovers, we are continuing to be highly selective”, explains François Petit. “We are also looking into corporate deals, in connection with acquisitions, as well as the strengthening of working capital, even if we are less spontaneously aligned with issuers on certain constraints, such as liquidity or due diligence, than on LBO deals”, concludes François Petit.

JULY-AUGUST. NO.47

AGF Private Equity ensures transparency on its performances K

PMG has just certified AGF PE’s valuations and performances as compliant with the CFA Institute’s Global Investment Performance Standards (GIPS) at December 31, 2008. For the fifth year running, the investor has had its track record certified. This year, AGF PE has taken

a further step forwards on transparency, getting itself benchmarked against all European private equity funds: for each year of investment, each portfolio managed by AGF PE is compared against all of its peers. KPMG’s certification focuses first of all on the performance on all the in-

vestments made in Europe since 2001, with a net annual IRR of 19% at December 31, 2008: 22.8% annual IRR for the APEH III Europe, invested in midmarket buyout funds launched in 2002 and 6.5% for the APEH IV Europe launched in 2005. “AGF Private Equity’s fund of funds

strategy is outperforming many conventional direct investment funds”, confirms the delighted subsidiary of the German insurer Allianz, which invests primarily in local midmarket funds in Europe, with a high proportion of direct co-investments and secondary deals.

| Special Issue | August 2009 | PRIVATE EQUITY MAGAZINE

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NEWS FROM FRANCE

EXPRESS… EXPRESS…

As requested by its shareholders, Apax Partners and Altamir Amboise, Financière Hélios has been put into insolvency by the Paris trade court. This holding company, which owns 43.1% of the listed group Séchilienne Sidec, is in this way seeking shelter from its creditor banks for a sixmonth period. Apax Partners set up this classic leveraged holding structure in 2005 to take over the block held by Air Liquide in the specialist in building and operating electrical plants and steam production units. Société Générale Corporate & Investment Banking is announcing the creation of an advisory activity on debt restructuring and financing, within its mergers and acquisitions team. Headed up by Guillaume Dovillers, this business will draw on the expertise of the mergers and acquisitions, leverage financing and customer relationship teams with the bank's private equity funds.

Ophiliam, the management company created by Xavier Thoumieux and Thierry Gisserot, has just been accredited to manage debt funds (FCT securitisation vehicles). These securitisation vehicles make it possible to acquire French bank debt taken out in connection with LBO deals in particular, in accordance with the banking monopoly provisions. The founders are looking to raise tens of millions of euros to invest in buying back large cap LBO debt with a buy-and-hold approach, as well as to combine debt buyback and “new equity” on small and mid cap LBO restructurings.

91% of the French SME business leaders polled for a Grant Thornton study had no plans to sell off their companies within the next 3 years. However, almost half of them are looking to develop their businesses through external growth operations, compared with 36% last year, with France still one of the few countries where the proportion is significantly increasing from one year to the next (with Poland, +29 points).

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APRIL. NO.44

12.7 billion euros collected and 10 billion invested in 2008 ecord collection levels for the major buyout funds and record investments for the development capital funds. This is how we could sum up the year for Afic’s (French Private Equity Association) activity in this sector, carried out in partnership

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with Grant Thornton this year. In this way, capital collection reached 12.7 billion euros, a strong increase compared with 2007 (10 billion euros), driven by several significant fundraisings, most of which began in 2007 and were closed during the first

MAY. NO.45

French Government creates an investment fund for SMEs T

he French Government is currently setting up an investment fund to support undercapitalised SMEs. Armed with 300 million euros, with one third coming from the strategic investment fund (Fonds Stratégique d’Investissement), it will aim to provide capital for “SMEs with the potential to develop but entering a difficult period, with bank payments that are too high, and whose capital needs to be restructured”, explains René Ricol, credit mediator. The tickets invested, always on a minority basis, could range from 500,000 to 15 million euros as soon as the fund is operational, probably between now and the end of June. Indeed, an agreement still needs to be reached on a similar public-private partnership to that set up with the France Investissement programme. While it seems to be taken for granted that the government's strategic investment fund (FSI) and the Caisse des Dépôts, headed by Augustin de Romanet, will contribute at least 100 million euros to the fund, the balance will need to be provided by private investors, particularly insurance firms. However, the sourcing is not expected to pose any problems: there is no shortage of

PRIVATE EQUITY MAGAZINE | August 2009 | Special Issue |

half of 2008. Eight vehicles over 200 M€ share a total of 8 billion euros, compared with 4.5 last year. With close to 1.2 billion euros collected, the investment vehicles linked to the ISF systems (FIP and FCPI) raised as much capital in 2008 as in 2007. However, this stability masks the 50% increase in funds raised on FIPs, at the expense of FCPIs, on which the amount raised in 2008 (617 M€) contracted by more than 20%. To no great surprise, investments dropped 20% over the year in 2008, coming in at 10 billion euros. A downturn that would have been 34% if

it had not been offset by the recognition, for the first time, of investments in businesses on the CAC 40 (1.8 M€ in 2008). Development capital has taken its revenge on LBOs, with the number of businesses financed climbing 27% and the amounts invested up 26%. Venture has also seen growth, with an increase in the number of businesses accompanied and the amount of investments rising 3% and 12% respectively. Lastly, LBOs are down in terms of the number of businesses (388, i.e. -16%) and the amount (7.4 billion euros, i.e. -28%).

LBUs save the year in 2008 he number of deals increased by 2.2% in 2008 compared with 2007. However, it is down 9% if we exclude leveraged buildup deals. Just a few years ago, investment funds did not necessarily see the benefit of reporting acquisitions made by companies from their portfolio in their business statistics. “We felt that the teams were looking to communicate on this subject”, acknowledges Stanislas Gaillard from Barclays Private Equity. Since the second half of 2008, the LBO Net results, which is soon expected to seal its independence from the British bank, reflects the emergence of LBUs. This trend, which can be seen since 2005, led to 76 deals last year. To some extent, it accounts for why funds are looking to further strengthen the ability to generate cash as well as the profitability or capital on their equity interests. Other winners in 2008, small deals were also overrepresented, particularly during the second half of the year. However, the number of deals over 500 M€ in revenues halved over the last six months of the year.

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Augustin de Romanet, CDC

files, whether from the credit mediator or the interministerial committee for industrial restructuring.

MAY. N°45

Sharp drop in NAV for IDI in 2008 T he listed group’s NAV dropped 29.3% in 2008 to 27.94 euros per share, compared with 40.61 euros at the end of 2007. A change seen “virtually exclusively in the second quarter”, stresses the investor, which recorded its first net loss since it floated in 1991. Despite 9.2 M€ in net capital gains generated on the disposals of Horosmart, Armor and Cnim, net income (group share) came to 60.5 M€, with 25 M€ in losses on disposals in the alternative management funds,

a business that IDI withdrew from almost entirely during 2008, with the balance due to the decline in the “fair value” of unlisted interests. In terms of investments, 45.8 million euros have been invested in private equity, with 35.3 million euros in France, in equity (World Freight Company, Hi-Média) and mezzanine (World Freight Company, Armatis, Almaviva, Balitrand), and 10.5 million euros in emerging countries, directly and through Idi Emerging Markets. At the

end of 2008, equity capital (group share) represented 216.1 million euros, down by nearly 100 million euros over one year, bucking the trend for net cash, up from -22.3 million euros to +35 million euros. Following a first quarter during which IDI recorded 41 million euros in fund inflows thanks to ongoing moves to sell off its alternative management fund portfolio, the group considers that it is “well positioned to capitalise on new investment opportunities”.

PORTRAIT B SUCCESS COLLECTOR

Philippe Nguyen, a career hitting all the right notes Behind the restraint of the former senior civil servant we might not expect to find a music lover who is so passionate about it that he has even devoted a museum to his favourite instrument. But when the piano collector becomes an investor in luxury craftsmanship, the two sides come together. o start off, he graduated from Centrale and ENA. A family history. Because the Nguyens like to blend scientific rigour with a genuine sense of public interest. The grandfather set the example and others have followed. However, less predictable was this young Centrale graduate’s precocious interest in finance, to which he dedicated his three engineering dissertations. It is amusing to remember the report on his internship with the Treasury Department on the international appeal of Paris’ financial market, presented in May 1981, which went straight to the dustbin! His experience of the political and economic world went much more successfully after he left ENA and found himself at the directorate general for industry midway through the 1980s, working within the modernisation industrial fund,

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LANDMARKS

His quest for new challenges took him to the Caisse des Dépôts et Consignations, where he tackled CDC Participations in 1994 in order to bring about changes in this organisation, evolving from proprietary management to third-party management. He then chose to sell listed shares (Accor, Crédit Lyonnais, etc.), and to create the first major French private equity operator: first in development capital, then from 1995 venture capital and from 1997 buy-outs, with the company in the end achieving profits of over 90 million euros in 2000. Then on to the next challenge! It was Crédit Lyonnais that came looking for him in order to drive the dynamic development of CLAM PE. However, he did not stick around for long, since he felt that the captive model was

HE HAS ONE OF THE WORLD’S LARGEST PIANO’S COLLECTIONS, FROM FLÜGEL TO LISZT.

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> 1958: born in SaintMaur-des-Fossés (Valde-Marne) > 1986: graduated from ENA (Denis Diderot year group) > 1987: head of the finance office in the French ministry of industry’s directorate general > 1990: senior civil servant in the French Treasury division > 1992: firm director in CDC’s banking business branch > 1994: company secretary and chief financial officer at CDC Participations > 2000: chairman of the management board of CLAM Private Equity (Crédit Lyonnais) > 2002: creation of Investors in Private Equity

No showiness or false modesty

the strategic investment fund of its time, on the redevelopment of stricken areas (notably the NORMED boatyards). Then came a “great period” when, alongside Jean-Claude Trichet at the head of the Treasury, he worked on setting up bilateral financial agreements across all continents. During this time, he certainly honed his fine sense of economic cycles and austerity.

already outdated, preferring to go independent together with his team. This led to the creation of Investors in Private Equity in 2002 with his alter ego François Nicoly. In total discretion, Philippe Nguyen built a successful business founded on the model that had proven its value at CDC: as a longterm industrial investor. In six years, the company raised and invested more than

400 million euros, arranging deals for over 600 million euros in equity, managing a portfolio with a total enterprise value in excess of 3 billion euros. Ermewa (rail logistics), World Freight Company (airfreight)…IPE has been creating leaders on complex markets. An original builder strategy that has paid off, with the first exits generating IRRs of over 25%. Enough to make Philippe Nguyen arrogant or boastful? This is not the company way. IPE’s founding chairman has never been attracted by the star-spangled side of success: a sense of modesty and a personality more inclined to restraint. Which does not in any way mean that he is not aware of his value, avoiding the pitfalls of false modesty: “I only do what others cannot do”. In an ego-dominated business, his is not one of the least developed.

Investor in extremely luxurious craftsmanship Excesses that are also reflected in his interests: Philippe Nguyen is a piano collector! While he refuses to disclose the number of pieces he has built up with his “lifetime project”, he makes it known that he has one of the world’s largest collections (from Flügel’s tangent to Liszt’s piano and Napoleon’s piano), from the early 18th century through to today. A slightly dominating passion that led him to buy an abbey in Aisne (Abbaye de Val Chrétien) in order to create the European piano museum: Piano Forte Museum. Which is due to open its doors to the public in five years, just enough time to restore the 12th century abbey and the pianos from the 18th and 19th centuries, which calls for know-how and expertise that is virtually non-existent today (no more than five renowned restorers in Europe). It is surely this desire to safeguard unique craftsmanship and a certain European lifestyle that led him to create CELT (Compagnie Européenne de Luxe et de Tradition) at the end of 2007, an ISF holding that invests in European SMEs specialised in extremely luxurious craftsmanship. With Odiot, the oldest French gold and silversmiths founded in 1690 and Cristal et Bronze, a specialist in luxury taps, Philippe Nguyen has assembled the first two parts of a structure that is expected to have 100 million euros in revenues within three years. We can have confidence in the man's passion and the investor’s intuition to once again pull Houda el Boudrari off a masterstroke! ■

| Special Issue | August 2009 | PRIVATE EQUITY MAGAZINE

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INTERVIEW

N°46 - JUNE 2009

Thomas Devedjian is a director and member of the executive committee of the French strategic investment fund. Private Equity Magazine looks back over the organisation and means of action of this French sovereign fund, created in December 2008.

How is the FSI fund structured? The FSI fund has a streamlined governance structure around a board of directors chaired by Augustin de Romanet and an investment committee chaired by Patricia Barbizet. Gilles Michel, the fund’s CEO, heads the executive committee which is made up of five members. Approximately 10 investment directors and 12 business managers have been recruited from various sectors, from merchant banking to investment funds, industry and auditing, as well as from our shareholders, the state and the CDC. 20 billion euros in assets have been contributed to us, with the following breakdown: 6 billion euros in cash from our shareholders, 51% for the CDC and 49% for the State, and 14 billion euros in securities and equity interests, contributed in equal portions by these two parties. The State has already specified its contributions: a fraction of its interest in Aéroport de Paris

and France Telecom, as well as its entire stake in Chantiers de l’Atlantique. In terms of the CDC, its contributions will be effective in July, but Augustin de Romanet has already made it clear that they will not be the CDC’s majority interests. What would be your initial assessment? The FSI fund has made six direct investments*, representing around 300 million euros. In this way, some 500 million euros have already been invested if we include the 200 allocated to the FMEA**. By the end of 2009, 1.5 billion euros should have been invested, with an annual cruising speed rate of between 2 and 3 billion euros. We currently have 24 active files, from all sectors and all sizes of businesses (see chart), on which we are at a more or less advanced review phase. Three quarters of them come to us from the company managers themselves or intermediaries such as merchant banks; the rest comes from the CDC’s regional network, the public authorities in the broadest sense (including elected officials) or the FSI fund itself, which has a proactive role with businesses through its regular contacts with the teams of René Ricol, credit mediator, and the French innovation agency (Oséo). What is the FSI fund’s investment philosophy? Our goal is to support French businesses with projects strengthening the competi-

FSI : MEANS OF ACTION AND INVESTMENT State 49%

CDC 51% 6 billion euros cash-assets 14 billion euros in securities and equity interests

SOURCE : FSI

FONDS STRATÉGIQUE D’INVESTISSEMENT

8

Direct acquisition of equity

PRIVATE EQUITY MAGAZINE | August 2009 | Special Issue |

Sectorial Initiatives (examples : FMEA, wood chain, etc.)

France Investissement & others PME funds (management authority given to CDC Entreprises)

tiveness of the country’s economy, in terms of knowledge, brands or technology. The FSI aims to have a structuring action for these businesses, providing them with capital in order to enable them to take their development up to the next level at a time when financing is growing increasingly scarce. We always operate on a minority basis, but we ensure that our rights are respected by taking part in the company’s governance and determining the conditions for our exit as soon as investments are made with the other shareholders. We are not looking to compete against other investors, but want to act as a catalyst and attract the interest of investors, who may, if they wish, co-invest with us. With this in mind, the FSI fund signed up to a partnership in May with Abu Dhabi’s sovereign fund, Mudabala. As far as the investment horizon is concerned, the FSI fund can be defined as a long-term investor, with an average horizon of five to seven years, which may be extended if required by the project. In any case, we will ensure that our exit is carried out in the best interests of the business concerned and our shareholders, with the flexibility that our evergreen status gives us, which means that we do not have to return the funds at a given time. To sum up, the FSI will act as an “informed” investor in terms of the choice of its investments and the target yield, which must be comparable to a private investor***. What is the scope for the FSI fund? Our ticket will be able to vary from 10 (minimum threshold above which we take over from CDC Entreprises) to several hundred million. Which means that the FSI is looking at strongly growing SMEs as well as very large listed companies. Our missions include strengthening the capital of an international business likely to play a role in its sector's consolidation, as well as the capital of a company whose shareholding structure needs to be stabilised, in order to restore the climate of trust needed for it to develop. In terms of sectors, we only exclude financial services and real estate. Why are you launching a biotech fund? The FSI fund has announced a series of biotech initiatives, aimed at promoting the emergence of young high potential biotechnology businesses and including

© PRIVATE EQUITY MAGAZINE - OLIVIER HÉRAUT

The strategic investment fund, an “informed investor”

© PRIVATE EQUITY MAGAZINE OLIVIER HÉRAUT

setting up a dedicated investment fund specialised in this sector. This biotech fund, which has been set up following the government's review and consultation with healthcare businesses, will be subscribed for one third by the FSI and the rest by French pharmaceutical laboratories. We have already received very serious expressions of interest from some of them. The vehicle, which will be based on an FCPR venture capital fund, will have 100 to 150 million euros and its fundraising should be completed by the end of July. Through this fund, up to 10 million euros may be invested for each project, on a co-investment basis with funds on the market. Projects requiring a larger contribution will be looked at directly by the FSI. A dozen files have already been submitted to us, and will be examined by our dedicated investment team, currently being recruited, and our scientific committee. Also to further strengthen the help given to this high growth potential sector, CDC Entreprises will be stepping up the pace of its investments in funds of funds in biotechnologies, with a budget of 75 million euros over two years.

Could the FSI fund invest in struggling LBOs? This is not being ruled out, but our involvement would be dependent on the viability of the company's operations, and the restoration of a sustainable financial structure. Some companies under LBOs have a level of debt that is unsustainable compared with their cash generation, but if their business is intrinsically viable, we are willing to take a look at them and accompany them in order to emerge from this situation. Provided that the shareholders and existing lenders have done their work, since the FSI is not intended to consolidate or reinforce a situation that is not stabilised. Where do things stand with Heuliez? The team which is managing the case is working on analysing the project and looking for co-investors. The investment requirements for the electric vehicle project that we could invest in have been put at between 40 and 50 million euros, with a 10 million commitment for the FSI, and 5 million for the Poitou-Charentes Region. Why would you want to join the FSI fund

From left to right, the five members of the FSI executive comittee: Agnès PannierRunacher, Jérôme Gallot, Gilles Michel, Thomas Devedjian et Hervé Guyot.

when you come from the world of investment funds? Paradoxically, the crisis affecting finance and the world of LBO funds has opened up an outstanding opportunity for us and we have received applications from very high quality candidates. Compensation for members of the FSI is primarily fixed, although with a performance component, but not as a carried interest. As far as I am concerned, after being in the public sector with the French government shareholding agency (APE), then a technical advisor at the French ministry of economy, particularly on operations opening up the capital of public companies, then in the private sector, as investment manager at Eurazeo, I saw the possibility to combine these two experiences within the FSI fund. ■ F-X Chapelle * Daher, Valeo, Farinia, Led To Lite, 3S Photonics and Gemalto ** The automotive equipment manufacturer modernisation fund (FMEA) is subscribed for one third by the FSI and two thirds by Renault and PSA Peugeot Citroën. *** On June 4, Gilles Michel indicated to Reuters that 10% was “a good target”

| Special Issue | August 2009 | PRIVATE EQUITY MAGAZINE

9

A

FRENCH MARKET

PRIVATE EQUITY MAGAZINE 2008 LEAGUE TABLES… Private Equity Magazine has ranked the most active funds in France in 2008, according to the value of the companies they invested in. collapse in global LBO activity in value terms, drying up of bank credit on large caps, 2008 can truly be qualified as an Annus Horribilis on many levels for investment capital. While France has of course been hit by the fallout from the financial crisis, investment capital funds have held up very well, except for the large caps, as shown by this fourth edition of the Private Equity Magazine’s league tables. While business has plunged in terms of value, the number of deals is only around 10% lower than 2007, notably on account of the good performance by venture, expansion capital and small caps LBOs. Venture capital does not yet seem to have been affected by the economic turmoil. Despite the drop in tech company valuations on the stock market, this segment has benefited from the success of the various tax optimisation tools for individuals, boosted by the French labour, employment and purchasing power law (Loi TEPA). While Sofinnova Partners is continuing to invest through its venture capital funds (FCPR), investments through high-tech mutual funds (FCPI) still account for the majority of the most active venture funds, including Truffle Capital, Sgam AI PE (25 investments out of 26) and OTC Asset Management. The latter has also dethroned Sofinnova in just two years in the rankings. The small cap range has not only maintained its appeal, but has performed admirably. The 20 most active investment funds have invested an average ticket of 3.75 million euros in 215 businesses with a value of under 30 million for a total volume of 805 million euros. This compares with the 541 million invested in 2007. In this area, Naxicap Partners clearly stands out. However, Demeter Partners, which wrapped up its second themed venture capital fund at 125 million euros in September, has shaken up the hierarchy this year. The funds polled have also expressed their satisfaction at seeing development capital deals and small LBOs included in the rankings. Indeed, many deals combine an equity interest with a slight leverage effect.

70%

Mid caps subdued Quite a mixed bunch of protagonists can once again

10

PRIVATE EQUITY MAGAZINE | August 2009 | Special Issue |

be seen on the midmarket’s lower range, which paradoxically explains why activity levels have been kept relatively high compared with the larger segments. In this way, some managers have chosen to look at lower enterprise values in order to carry out LBOs with a reasonable leverage effect. This is notably the case for Barclays Private Equity and Edmond de Rothshild Capital Partners, which is hot on the heels of LBO France at the top of the rankings with an enterprise value of 30-75 million euros. Other players such as Banexi Capital Partenaires, which had maintained a high rate of investment in 2006 and 2007, have capitalised on the economic environment to manage their equity interests and roll out a few external growth operations. For deals valued over 200 million euros, 2008 saw three clearly distinct periods, in view of the availability of debt. An active first half of the year, following on from 2007, with Carlyle acquiring a 35% stake in Numéricable, But’s acquisition by Goldman Sachs CP, Colony Capital and Merchant Equity Partners from the industrial firm Kesa Electricals, or the acquisition of Maisons du Monde by LBO France and Apax from Barclays Private Equity and Ixen Partners. A still dynamic third quarter and start to the fourth quarter, notably with several outstanding deals that began before the summer and were closed, such as Converteam, bought out by LBO France, Labco by 3i, CEPL by Arcapita and Cegelec by Qatari Diar, and an end to the fourth quarter that was sluggish to say the least, with the supply of bank credit drying up completely, although with the significant exception of Socotec’s takeover by CDC Capital Investissement, completed in December.

LBO France the most active If we now look at business, all tranches combined, for the various structures that took part in the rankings (or for which we have been able to measure the level of equity invested in 2008), LBO France stands out as one of the most dynamic structures on the market, with 1.3 billion euros of equity investments declared. It is followed by the direct, captive and semi-captive funds of French banking groups. Natixis as a whole, including Seventure, Naxicap Partners, Initiative & Finance, Actem Partners, EPF

Partners, NI Partners and Ixen, has maintained its level of activity from one year to the next, with more than 317 million euros of investments. The CDC vehicles, CDC Innovation, CDC Entreprises and CDC Capital Investissement, although encompassing totally different investment issues, are just behind, with 312 million euros. CIC Finance, CIC Banque de Vizille, CM-CIC Capital Privé, CIC LBO Partners and IPO represent a combined total of 267.35 million euros. Lastly, Crédit Agricole Private Equity comes in with 141 million euros, including the business of Vauban Partenaires and Participex Gestion, virtually identical to the volume of its investments in 2007.

DEBT: LBO DEBT STRICKEN Disappearance of financing requiring more than one billion euros of debt. As expected, the overall amount of senior and mezzanine debt has been divided by 10 compared with 2007, dropping from nearly 56 to 5.7 billion euros. Only Converteam put together debt in excess of one billion. Calyon, Natixis and SG are the new top three lenders, present on co-syndication on 2008’s biggest deals (Converteam, Maisons du Monde, Labco and Etanco). On a European LBO financing market that has shrunk from 300 to 15 players, the trend for a return to club deals, with banks working with one another and sharing deals, looks set to continue.

MEZZANINE: LESS BUOYANT MARKET THAN IN 2007 : The overall capacity on the mezzanine market has been halved. The mezzanine market, which was very buoyant in 2007, saw a very marked downturn in 2008, contracting by nearly 45% in terms of the amounts invested by its top 15 players. ICG still dominates, but with 120 million euros (estimate), its level of mezzanine lending is considerably lower than the 400 million euros seen in 2007. Nevertheless, the pan-European fund has continued to lead the way, with two deals reported: Labco and CEPL (10 in 2007). ICG is just ahead of AXA Mezzanine, European Capital and Euromezzanine, which have also seen a sharp drop in their investments despite a higher number of deals. ■

* In million euros

R ANK

1 LBO France** 2 AtriA Capital Partenaires 3 AXA PE 4 Alpha Private Equity Fund** 5 3i** 6 21 Centrale Partners 7 Naxicap Partners 8 Barclays PE 9 Butler Capital** 10 IFP Investissements** 11 Crédit Agricole PE 12 Somfy Participations** 13 Weinberg Capital Partners** 14 LFPi-FPG 15 Chequers Capital** TOTAL * In million euros

72,3 56,3 44,9 42,8 36,7 33,1 31,7 30,7 27 23,6 23,6 23,4 20,1 18,5 18,3 503

39 10 10 12 16 5 9 30 6 14 15 8 4 4 18 185

AMOUNT 2007*

53,0 19,6 45,2 12,3 10,4 21,0 11,8 17,0 12,6 27,3 15,9 20,1 22,1 31,7 5,5 455,1

* In million euros

75-200 M¤ enterprise value GP

1 Naxicap Partners 2 Demeter Partners 3 CIC Banque de Vizille 4 Turenne Capital Partenaires 5 UFG PE 6 LFPI-FPG 7 Crédit Agricole PE 8 BNP Paribas Développement 9 CDC Entreprises 10 IPO 11 CM-CIC Capital Privé 12 Initiative & Finance 13 Perfectis PE 14 EPF Partners 15 Midi Capital TOTAL

DEALS NUMBER

AMOUNT 2008*

DEALS NUMBER

140 66 61 50 47 45 39 38 38 35 34 34 25 21 20 693

2 4 2 1 1 2 6 2 1 1 3 1 1 1 1 29

30 28

72 35 58

46 32 102 809

**Not confirmed - source PEM

methodology -Once again this year, the rankings only factor in equity investments carried out in 2008 (closing date) on French targets, even if we have had to show some leeway with the application of this concept on certain deals. -Another indulgence: taking listed investments into consideration in a ranking that is supposed to present private equity deals. Indeed, it is difficult to ignore this trend that emerged in 2007 as bank credit became increasingly scarce and that is expected to become more marked on account of the carnage seen on stock market values. The ranking therefore includes the equity interests acquired by Eurazeo in Accor, PAI Partners in Atos Origin and Apax Partners in Altran. -The venture fund rankings reflect the investments and followons carried out for start-ups created in France (which have generally existed for less than five years). For tranches with an enterprise value of between 0 and 500 million euros, some of the investments taken into consideration are build-ups with a new equity contribution. In addition, some incorporate the investments made at the time of capital restructurings into their figures.

GP

AMOUNT 2008*

DEALS NUMBER

1 Advent International** 193 2 CDC Capital Investissement ** 177 3 Astorg Partners 120 4 IK Investment Partners** 106 5 Gores Technology** 104 6 Financière Agache PE 100 7 Abenex / ABN Amro Capital ** 96 8 Duke Street Capital ** 81 9 LBO France ** 65 10 Apax Partners 59 11 iXEN Partners 50 12 NI Partners 30 13 CIC Finance 10 14 Céréa Gestion 8 15 CM CIC Capital Privé 1 TOTAL 1200

3 1 2 1 1 1 1 1 1 1 2 2 1 1 1 20

* In million euros

AMOUNT 2007*

90 156 134 35 15

200 177 57 30 5 5 1427

**Not confirmed - source PEM

LBO DEBT (>100M¤ enterprise value) BANK

AMOUNT 2008*

DEALS NUMBER

1 CALYON 1 100 2 Natixis 897 3 SG 735 4 RBS 651 5 CIC 450 6 ING 321 7 BNP Paribas** 233 8 HSBC 230 9 Palatine 211 10 Goldman Sachs** 179 11 Crédit Suisse** 179 12 Crédit Mutuel*** 170 13 UniCrédit*** 167 14 CADIF 124 15 IKB Deutsche Industrie Bank*** 93 TOTAL 5561

6 8 7 5 4 3 4 1 1 1 1 8 9 5 10 73

* In million euros *** Source : Thomson-Reuters

1 LBO France 2 EdR CP 3 IPO 4 Cognetas 5 OFI PE Capital 6 21 Centrale Partners 7 CIC Finance 8 Acto Capital 9 Activa Capital 10 Barclays PE 11 CDC Entreprises 12 Crédit Agricole PE 13 Naxicap Partners 14 MBO Partenaires 15 Abénex TOTAL

AMOUNT 2008*

DEALS NUMBER

83 50 42,3 40 39 36 31,7 30,5 30 30 30 19 18,9 18,3 18 516,7

3 3 8 1 4 3 6 2 2 2 1 3 10

AMOUNT 2007*

30 25 10 19 39 8 18 58 59 4 20 659

1 49

* In million euros

200-500 M¤ enterprise value

AMOUNT 2007*

GP

AMOUNT 2007*

9811 3342 2875 10421 766 4 9056 1680 1890 1137 55990

**Not confirmed - source PEM

> 500 M¤ enterprise value GP

1 Carlyle 2 Eurazeo 3 Qatari Diar** 4 Colony Capital ** 5 PAI Partners 6 LBO France ** 7 Barclays PE 8 3i ** 9 Apax Partners 10 Arcapita** 11 Goldman Sachs CP** 12 TCR Capital** 13 CIC Finance 14 NI Partners 15 Crédit Agricole PE TOTAL * In million euros

AMOUNT 2008*

DEALS NUMBER

1 100 561 544 500 411 328 316 140 115 99 79 40 26 20 10 4289

1 1 1 3 1 1 2 1 1 1 1 1 3 1 1 20

AMOUNT 2007*

450 439 1100 300 72 0 21 10 0 0 5081

**Not confirmed - source PEM

MEZZANINE (in M¤) GP

1 ICG** 2 Axa Mezzanine 3 European Capital 4 Euromezzanine 5 Capzanine 6 LFPI Mezzanine 7 Paris Orléans 8 IFE Conseil 9 Mezzanis 10 Tikehau Investment Mgt 11 OFI 12 Acto Mezzanine 13 Cerea Mezzanine 14 CIC Mezzanine 15 Indigo Capital TOTAL * In million euros

AMOUNT 2008*

DEALS NUMBER

120 111 107 102 64 64 57 44 41 40 37 36 35 24 20 902

2 5 6 7 8 11 6 6 6 8 4 4 6 5 2 86

AMOUNT 2007*

400 192 345 216 76 20 76 94 22

60 13 43 74 1631

**Not confirmed - source PEM

Special Issue | August 2009 | PRIVATE EQUITY MAGAZINE

11

Sources : funds, PEM

36,5 63,5 5,0 30,2 13,3 15,2 24,1 38,6 9,5 15,0 26,3 23,8 17,9 17,2 4,5 389,8

AMOUNT 2008*

R ANK

41 20 7 24 14 6 26 11 9 19 16 17 14 10 8 242

GP

R ANK

55,7 53,9 40 37,2 33,5 27,8 26,5 25,1 22,3 22,2 21,2 18,2 17,5 15,5 15 431,6

AMOUNT 2007*

R ANK

DEALS NUMBER

30-75 M¤ enterprise value

R ANK

1 OTC Asset Management 2 Sofinnova Partners 3 CDC Entreprises 4 Seventure 5 Truffle Capital 6 Innovacom 7 Sgam AI PE 8 AGF Private Equity 9 A Plus Finance 10 Auriga Partners 11 Crédit Agricole PE 12 CDC Innovation 13 CM-CIC Capital Privé 14 Ventech 15 I Source Gestion TOTAL

AMOUNT 2008*

R ANK

GP

0-30 M¤ enterprise value

R ANK

R ANK

venture

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11/6/09 12:47:37

A

FRENCH MARKET

2008 LEAGUE TABLES OF

LEGAL ADVISORS Our 2008 league tables once again highlight the number of private equity deals advised by legal advisors in France as the first benchmark of ranking. n LBOs alone (all valuation tranches combined), the top 20 firms provided advice for 303 deals on French targets, compared with just under 500 in 2007. This represents one of the lessons drawn from this third ranking for private equity law firms, analysing 150 responses out of the 240 firms polled. Before taking

O

VENTURE / EXPANSION RANK

LAW FIRM

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Jones Day UGGC Gide Loyrette Nouel Pinot De Villechenon Chammas & Marcheteau Joffe & Associés Alerion Orsay Valluet-Achache SJ Berwin Reinhart Marville Torre Lefèvre Pelletier & Associés Fidal Société d’Avocats* Lamartine Conseil* Brunswick Société d'Avocats

DEALS NBR.

AMOUNT DEALS NBR. M€ 2007

24 21 20 20 18 14 13 12 11 10 10 10 9 8 7

133 85 82 51 98 26 95 103 13 287 38 29 25 16 50

27 10 20 10 15 11 12 18 13 16 2 5 3 3

*Not confirmed - source PEM

0-50 M¤ enterprise value RANK

LAW FIRM

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

HPML Lamartine Conseil CMS Bureau Francis Lefebvre Lefèvre Pelletier & Associés Mayer Brown De Pardieu Brocas Maffei SJ Berwin Denton Wilde Sapte Fidal Société D'Avocats UGGC Redlink Baker & McKenzie Orsay Salans Gatienne Brault & Associés

DEALS NBR.

32 25 12 12 11 11 9 9 8 8 8 7 6 6 6

a detailed look at the findings, one initial assessment stands out: while the “qualitative” indication used in previous years has been removed, the quality and clarity of the answers given by the firms to the questionnaires still varies considerably. The downside with the ranking in terms of the number of deals for each enterprise valuation range is that it includes pure M&A deals, international deals on which the French team's role does not appear to be well defined, or even small-cap LBOs added to the mid or large-cap list. A tendency to swell the figures that is even more tempting this year since certain firms have worked on cross-border deals thanks to their European teams. However, the numerical approach is still particularly relevant for the “lending advisory”, “manager advisory” and “structuring advisory” categories, since it makes it possible to highlight the firms that have been most active, whatever the amounts.

Venture and development In the end, while the 2008 rankings reveal a few surprises at the top of the table, on the whole we can find the leading players from previous years again. Development and venture capital funds, less affected by the crisis, are still more than ever the main sources of deals for specialised firms: Jones Day, Gide Loyrette and, this year, UGGC. Still very active compared with mid and large caps, small deals

404 236 317 112 212 195 237 156 80 79 23 141 126 126 35

DEALS NBR. 2007

40 36 4 12 8 9 9 5 6 5 4 4 7

RANK

LAW FIRM

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Mayer Brown SJ Berwin Latham & Watkins* Sarrau Thomas Couderc De Pardieu Brocas Maffei Clifford Chance Ayache Salama & Associés Hoche* Lefèvre Pelletier & Associés Baker & McKenzie Field Fisher Waterhouse Paul Hastings August & Debouzy* Freshfields Bruckhaus Deringer CMS Bureau Francis Lefebvre

*Not confirmed

DEALS NBR.

14 12 7 6 6 5 5 5 5 4 4 4 3 3 3

AMOUNT M€

2087 1932 1210 875 770 868 793 705 575 638 450 288 863 775 534

Large caps bleak The sharp downturn on large-cap LBOs has mechanically triggered a significant drop in business for the flagship corporate teams that distinguished themselves during the period from 2005 to 2007. It is therefore difficult to decide between the advisers when each one of them is claiming a decisive role in the few deals on the market. Mayer Brown has certainly been the most visible. ■

methodology These tables rank Legal advisors for private equity transactions in France in 2008 (closing date) including Venture/expansion and LBO on companies (whose main business activities were in France) in the range of value displayed as follows : under 50 million euros, from 50 to 500 million d’euros and above 500 million euros. Some significant sales and build-ups were included in the figures.

> 500 M¤ enterprise value

50-500 M¤ enterprise value

AMOUNT M€

have as usual involved the two firms that are someway ahead of the others: HPML and Lamartine Conseil. Mid caps have seen a realignment of firms more used to mega buy-outs, such as Latham & Watkins and Mayer Brown, while the teams that have distinguished themselves over the past few years have limited the damage sustained (De Pardieu, Clifford Chance, Ayache Salama).

DEALS NBR. 2007

12 23 9 4 8 5 6 4 4 3 5 1 2 6

RANK

LAW FIRM

DEALS NBR.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Mayer Brown Weil Gotshal & Manges* Clifford Chance Freshfields Bruckhaus Deringer Linklaters Ashurst SJ Berwin Willkie Farr & Gallagher CMS Bureau Francis Lefebvre* Latham & Watkins* Franklin Jeantet Associés Baker & McKenzie Darrois Villey Gide Loyrette Nouel

4 4 2 2 2 2 2 2 2 2 1 1 1 1 1

AMOUNT M€

DEALS NBR. 2007

6700 2188 3750 3368 3000 2900 2728 1576 1090 400 2460 2460 1700 1700 1026

8 6 4 8 6 8 4 5 9 1 4 1 4 2

*Not confirmed

Special Issue | August 2009 | PRIVATE EQUITY MAGAZINE

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A

FRENCH MARKET

2008 LEAGUE TABLES OF

M&A ADVISERS This third edition of the most active financial advisors ranking in France in 2008 for private equity transactions points out the dramatic drop of activity.

T

VENTURE / EXPANSION

gorized by number of deals as the first benchmark of ranking.

Rothschild dominates the market Having said that, the year of 2008 remains favorable to Rothschild & Cie which stands at the top of the

0-50 M¤ enterprise value

RANK / RANK / BANKS / M€ M&A NBR. DEALS ADVISOR

DEALS AMOUNT EXIT M€ VALUE NBR. M€

RANK / RANK / BANKS / DEALS M€ M&A NBR. DEALS ADVISOR

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

13 9 8 6 4 3 3 2 2 2 1 1 1 1 1

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

DEALS

2 7 1 3 20 10 13 6 9 19 4 5 8 11 12

Aelios Finance Chausson Finance Bryan Garnier Clipperton Finance Financière de Cambon Lorentz Deschamps & Assos.* Linkers Close Brothers Sagax* ML Capital* Lazard Frères* LCF Edmond de Rothschild* RBC* Long Term Partners* Eurocapital*

79 25 81 52 3 14 7 32 17 4 35 35 21 11 8

18 38 9

2 4 10 1 6 7 15 5 3 26 8 11 9 13 14

DEALS NBR.

AMOUNT M€

The long march of the large cap

Rothschild & Cie Aforge Finance Bryan Garnier UBS WM Sodica Wagram Corporate Finance Societex Grant Thornton CF Aelios Finance MK Finance Close Brothers PricewaterhouseCoopers CF KPMG Corporate Finance CIC Finance Ernst & Young CF

12 9 9 8 8 8 8 7 6 6 5 5 4 4 4

311 210 119 350 146 144 63 187 230 16 142 107 123 85 80

*Not confirmed

50-500 M¤ enterprise value RANK / RANK / BANKS / DEALS M€ M&A NBR. DEALS ADVISOR

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

1 2 6 3 8 4 5 9 11 13 7 12 15 18 20

Rothschild & Cie Close Brothers Aforge Finance BNP Paribas SG CIB Natixis Finance Lazard Freres* Hawkpoint HSBC Wagram CF Calyon CIB* ABN AMRO/ RBS* UBS IB Societex Sodica

AMOUNT M€

17 6 6 5 5 4 4 3 3 3 2 2 2 2 2

3246 1083 687 955 576 938 708 553 471 452 610 467 423 291 159

*Not confirmed

14

PRIVATE EQUITY MAGAZINE | August 2009 | Special Issue |

RANK / RANK / BANKS / DEALS M€ M&A NBR. DEALS ADVISOR

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

2 1 8 3 4 5 7 6 16 9 10 11 12 13 14

*Not confirmed

Rothschild & Cie Nomura- Lehman Brothers UBS IB BNP Paribas Goldman Sachs Morgan Stanley HSBC Hawkpoint Wagram CF RBC* Goetzpartners CF* Merrill Lynch* Calyon CIB* ABN AMRO/RBS* Lazard Frères*

DEALS NBR.

7 4 4 3 3 3 3 2 2 1 1 1 1 1 1

Advising one of the 13 large cap operations on companies valued over 500 million euros was enough to enter our ranking. It was thus decided for the first time to consider acquisitions of listed companies stakes over 15%, which benefited to three major advisors : Lehman Brothers team (now Nomura) who advised Wendel on a 5 billion deal to acquire a 21,5% stake of Saint Gobain, Morgan Stanley on the 500 M€ operation by PAI to buy 17,9% of Atos Origin, and finally Wagram Finance’s mandate to advise Axa Private Equity on the 15% stake acquisition of Carbone Lorraine valued at about 105 M€. Lack of economic visibility within forthcoming months, persistant valuation gap from buyers to sellers side and shortage of LBO financing are numerous grounds for M&A activity level to stay low in 2009. ■

METHODOLOGY

> 500 M¤ enterprise value

DEALS NBR.

three segments of LBO deals. The team led by Laurent Baril and Richard Thil has proved for the past 8 years to be a noted experienced financial advisor mandated by investment funds. Only venture and expansion funds are not trusted by them. On this segment, Aelios Finance, Chausson Finance and Bryan Garnier are the undisputed leaders of a less intermediated market. Newcomers on the mid market ranking (from 50 to 500 M€) such as Natixis Finance should also be mentioned, as the Big Four are stepping out of it.

AMOUNT M€

7839 8636 2888 4333 3857 3527 3147 3500 433 2457 1876 1700 1026 850 550

-The table venture/expansion includes advisors (banks or firms) appointed in 2008 (closing date) to raise venture and development capital for French businesses. Exits have been taken into consideration except for the case of LBO exits. -LBO advisors for an enterprise value from 0-50 and 50-500 million euros: These tables rank the advisors (banks or firms) appointed in 2008 (closing), for acquisitions or sales, to advise and negotiate acquisitions or exits on LBOs. The target companies must be French, except for build-ups. For LBOs in which the funds have a minority position, we have recorded the block corresponding to the fund's equity interests. -In the tranche for > 500 million euros, the amount awarded for LBOs on multinationals is proportional either to the percentage of capital considered to be French before the deal, or to the percentage of business estimated to be in France (as a % of revenues). Lastly, we have taken into account PIPEs by recording blocks over 15% for listed businesses acquired by funds.

Sources : funds, PEM

he PE Mag third annual ranking shows significant impacts of the massive decrease of deal numbers experienced in 2008. LBO Market dropped 60% from 2007 in France, according to Dealogic and fell by 82% from Q3 to Q4. A patent collapse reflected in our league tables cate-

Annonces_GB:Mise en page 1 01/09/09 11:39 Page1

AYA C H E , S A L A M A & A S S O C I É S

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N°41 - DEC./JANUARY 2009

Careers: profiles transformed The current crisis might change the private equity model, with a knock-on effect on the profile of teams within the sector: experts in financial engineering will now need to take on an operational role. Will this strategic shift be made with the same people?

own 20% at American Capital, 15% at 3i, 10% at Carlyle, 7% at Blackstone… most of the main LBO funds ended the year announcing layoffs. The drying up of credit sources triggered a drop in business by more than 70% in 2008, with no large deals seen at all since the summer 2008. Faced with this sluggishness, which may well continue, the funds have had to “adapt their resources to the market conditions and optimise their costs”, based on a time-honoured approach. And yet, they were said to be safe from the carnage among finance professions, these teams of a happy few people who had to buckle down and hold out until the end of the crisis before resuming their activities with renewed success. “There is no miracle”, sighs Diane Segalen, vice-chairman of the American recruitment firm CT Partners. “The large funds had recruited a lot over the last few years to support the rate of their investments. The freeze on deals since the second

EXPERT INSIGHT

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n a forced march, hesitating between regulation and code of good conduct, the public authorities are setting out a new order for executive compensation. The measures announced had previously been limited to compensation for managers of listed companies. However, this regulatory “tsunami” was bound to overtake this sector. In the French Senate, with quite a new approach, through an amendment to the 2009 finance bill, Senator Jean Arthuis revived the already established practice of French-style carried interests. The amendment had been on the cards for some time, but the current climate certainly paved the way for its rapid adoption. Proof being that it was approved almost in full by the government, which saw it as a

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half of the year has inevitably led to a streamlining of the workforce”.

Getting their hands dirty “These slimming treatments are however only affecting large-cap funds, which had recruited masses of analysts to set up deals”, adds Thibaut Roussey, from the specialised recruitment firm Alvedis. “Small and mid-cap funds are being less affected by the slowdown in activity and have smaller teams”. And while they may well be doing fewer deals, they are not short of work by any means. “During the crisis, we are strengthening due diligence on our investments, providing managers with the active support they may need to remain at the helm during stormy weather”, sums up Dominique Oger, chairman of Atria, who, alongside the team of professionals, is driving his entrepreneurs club forward at full speed, involving them in the strategies of portfolio companies. “Thanks to this specific approach, we have

way of regulating practices within the industry. It has to be said that until then, the tax system for carried interests was still not perfect since it was based simply on an administrative directive published on March 28, 2002. This was a delicate operation since it aimed to protect the system by legalising it. But this also came at the price of a realignment, probably in order to avoid a certain level of drift and to link entitlement to the system to an entrepreneurial risk on a “sufficient level”, with an increasingly clear tax approach: salary = function = performance / capital gain = investment = entrepreneurial risk. When the regulations come into force, they should apply to fund creations and share issues in carried interests as of January 1, 2009. As such, past and outstanding allocations should not be affected, unless this amendment involves a strengthening of the tax authorities’ position on the application of their directive. Looking ahead, it seems highly likely that newcomers to carried interests will be most exposed, with new subscription conditions no doubt seeming more complex than before. Watch this space… both for the past and the future.

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From left to right: Laurent Partouche, Denis Andrès, François Lugand - Legal advisors associates Arsene Taxand

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PRIVATE EQUITY MAGAZINE | August 2009 | Special Issue |

not had to recruit any operating partners or senior advisers”, confirms Dominique Oger, alluding to the recent passion for these rare pearls among his peers. Indeed, while certain large funds have always sought to surround themselves with leading industrial players (LBO France, notably with Noël Goutard, previously from Valeo, and Bernard Kastriel, previously from Lafarge), others have focused on profiles who knew how to put deals in place, but not actually manage the risks involved in the investments. Now that they are unable to sell off companies acquired at the top of the cycle, which have been hit hard by the economic slowdown, the funds are effectively being obliged to get their hands dirty. “For this, the team of investors must have an operational player with knowledge of the company that is not purely conceptual”, points out Didier Vuchot, chairman of the recruitment consultancy Korn Ferry.

Hunting entrepreneurs Where can these rare pearls be found? “Funds often prefer to turn directly to the managers of companies under LBOs, whose entrepreneurial qualities have already been proven”, highlights Diane Segalen. This is the approach opted for by CVC Partners, which has taken on the expertise of Patrick Verschelde (formerly Adisseo)”. Over the past few months, the hunt for the “old sleuths” of entrepreneurship has intensified. In October, Apax appointed the former chairman and founder of Atos Origin, Bernard Bourigeaud, as a senior adviser. Even rarer in a world marked by an excess of qualifications, Perfectis has taken on the services of a self-taught entrepreneur: JeanPierre Champeau, who took over the reins of the family business of the same name in 1975. He then led three buy-outs on this wooden structure manufacturer, between 2002 and 2006. Same approach, different styles: after taking on Jean-Paul Vettier (former member of Total’s executive committee) as a senior adviser, Sagard simply brought in a restructuring professional. In February this year, Régis Rivière joined the fund’s mid-cap team as an operational director. Previously Yoplait’s chief financial officer, he has led many missions to turn busi-

Defectors from the financial sector The current economic climate has also led to new vocations among bankers and M&A professionals: CVC Partners has recruited Charles-Henri Philippi (formerly HSBC) as a senior adviser, and the mid-cap LBO fund Duke Street is taking on the services of a new operating partner, Jean Garbois, who used to head up Fortis’ private banking business in France. After 25 years devoted to the development of Close Brothers, Olivier Dousset has just left the merchant bank to join LBO France as a partner and management board member. And that is not all...Gaël de Roquefeuil, the partner in charge of research for investor teams at Korn Ferry, predicts that “following the hedge fund crisis, opportunities are going to be created for private equity to increase its range of products within alternative

management (hedge funds / private equity / real estate), which will make it possible to recruit different backgrounds. Difficulties raising funds are also expected to create a need for capital market specialists”. “We are looking at the recruitment opportunities with interest, but people with a good reputation are by definition not very mobile”, adds Philippe Robert, a partner with Permira, which has just offered its investors a way out from its Permira IV fund, with 11.1 billion euros raised in 2006 and half invested. However, this offer is being made if investors agree to waive 25% of the fund’s profits, with management fees kept at their initial rate, ruling out the possibility of any job cuts in the 90-strong team (24 investments in the portfolio). “On the contrary, we plan to further strengthen our presence in France and we have just structured two dedicated teams for the healthcare and financial services

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nesses around (including Photo Services) within the consultancy Alvarez & Marsal. A way of preparing for the worst…Even young structures have to strengthen their ranks with valiant people from the field. Fondations Capital, the LBO fund created in 2007 by three former members of Eurazeo, has brought on board the valuable expertise of the former chairman of Elis (which has seen three LBOs), Philippe Bernard, as operating partner.

sectors in order to be ready to capitalize on the opportunities resulting from the crisis”, explains Philippe Robert. Indeed, the spectacular drop in valuations in the financial sector is certainly attracting the funds. In this way, Cognetas has just recruited a senior adviser, David Pusinelli (formerly Close Brothers), to track opportunities in this sector. Which has not prevented it from offloading six people, representing 12% of its workforce at its four European offices (two less in London, two less in Frankfurt and one less in Paris and Milan). “Reluctantly, to adapt to the slowdown in activity”, according to Edward Koopman, who has taken over from Jean Ducroux at the helm of the fund together with Patrick Houda el Boudrari Eisenchteter. ■

“During the crisis, we are strengthening due diligence on our investments, providing managers with the active support they may need”, Dominique Oger (Atria) | Special Issue | August 2009 | PRIVATE EQUITY MAGAZINE

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SHARING OF VALUE

While the downturn in the economic environment is mechanically fuelling the bitterness of employees under LBOs who are being excluded from sharing in the capital gains seen during the prosperous period, the few jackpot cases which have been widely covered in the media on summer 2008 have also tarnished the sector's image. Enough to trigger a response by the industry, which, by calling for self-regulation, is also looking to anticipate any more coercive measures. (N°43. MARCH 2009)

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f we have got to this(1), it is because we have been too focused on profits”. The mea culpa of Henry Kravis, chairman of KKR, at the Davos Forum, acknowledging the responsibility of LBOs in the current crisis, sounds like a scathing denial for the industry. It is not sure that this hint at sincerity has been appreciated by his peers, who have been working over the last few months to change the sector's reputation for greed to a socially responsible image. As soon as he took over at the head of the French private equity association (Afic) in June 2008, Pierre de Fouquet made this his hobbyhorse, putting in place a charter advocating among other things social dialogue and the sharing of value. The president of the Afic is also pleading for “part of the capital gains to be able to be transferred to staff, taxed up until now under the capital gains system rather than as wages. Aware that “in a difficult economic climate, tensions surrounding the sharing of capital gains might intensify”, Pierre de Fouquet never gets tired of demonstrating the caricature-like view of LBOs as destroying jobs. Moreover, the Afic tackled this issue back in 2007, commissioning a study into the social impact of LBOs with

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PRIVATE EQUITY MAGAZINE | August 2009 | Special Issue |

the consultancy Constantin. The findings show that the funds are very sharing, with “20% of businesses opening their capital up to non-executive staff, and 61% opening it up to their executives”.

Social impact Even better, LBOs actually create jobs: “the average rate of growth for the workforce in businesses under LBOs in France is 4.1%, with 78% corresponding to net job creations”. Other analyses reveal slightly more nuances when it comes to this impeccable social performance. In this way, a European study by Ernst & Young in 2006 revealed that “40% of companies under LBOs find themselves, when they are sold off, with a lower level of jobs than at the time of their acquisition”. The debate surrounding the social impact and sharing of value on LBOs could have gone on for ever between specialists in the elegant and luxurious drawing rooms of the eighth arrondissement in Paris, if a number of highly mediatised cases had not brought the stratospheric capital gains of certain funds and highly select circles of LBO managers into the public spotlight. As well as the fury of other employees who were left with just a few crumbs from the

Y ? L S L O B L M O R

feast. This summer, the 37 million euros pocketed by Editis’ management started to heat things up when the jackpot for Converteam’s managers, estimated at 700 million euros, left the Paris market dumbfounded and beat all records…of “indecency”. “This case could have had a far more disastrous media effect, but fortunately it was eclipsed by the many events elsewhere”, confirms a fund manager, irritated like many of his peers by practices assimilating the sector with a “giant casino”.

Sharing the cake Indeed, the financial crisis with its succession of bad news stories and sensational scandals has overshadowed the unions’ condemnation for businesses under LBOs. Various emergency measures adopted have also helped calm things down. An exceptional 1,000 euro bonus has been proposed to staff at Editis. At Converteam, 38 million euros have been set aside from the 1.8 billion in capital gains to provide all members of staff with a bonus equivalent to two months wages, while opening up 5% of the capital to employees, combined with a top-up contribution by the company. However, the threat is still there. “It is just a brief respite, with the downturn in the economic environment fuelling the bitterness of employees under LBOs who have not had their share of the cake during the prosperous period”, points out a consultant close to various funds. And when the masses complain, the state legislates. This is what industry professionals are afraid of. They know that the legislator has them in its sights. The French economic analysis council, through its recent report on “French capitalism and private equity”, recommends raising taxes on fund managers if they do not share the value from their deals with all staff. In this way, carried interests “We are against would no longer be subject to the advantageous capital gains tax this ecumenism, system, but rather income tax, if gains are not reasonably shared which wants with employees. Similarly, Dominique Sénéeveryone to become quier, chairman of AXA Private Equity, made a recommendation shareholders.” a few months ago in a letter to the editor of the French daily Le René Maury, chairman Monde to set aside 5% of capiof CDC Capital tal gains on LBOs for staff, even if employees are not investing in Investissement. the takeover.

Democratising shareholding Without waiting to be forced to do so, certain funds have already rolled out employee shareholding mechanisms, if only to ensure the consistency of the sacrosanct “alignment of interests”. With the financial leveraging effect coming through the current difficult period, value will need to be created primarily on an operational level. Which more than ever makes it necessary to ensure the buy-in and motivation of staff. This is how the company mutual fund has become part of the fund landscape. Since the French law of December 31, 2006, company mutual funds (FCPE) have been able to benefit from a simplified system and be associated, through a shareholder agreement, with LBO funds. A way of "democratising" employee shareholding and savings mechanisms for non-listed businesses… The snag is that setting up a company mutual fund requires accreditation from the French securities regulator (AMF), as well as negotiations with employee representative partners. As a result, even simplified, the mechanism is deemed to be complex, expensive and time-consuming for mid-size businesses. Another constraint: liquidity. “This system is combined with a new liquidity mechanism that allows the FCPE fund to be fully invested in securities in the takeover holding structure if the latter undertakes to buy back its securities, for up to 10% of its share capital”, explains Jean-Philippe Debas, who has just set up a management company, Equalis Capital, to provide businesses with support on setting up company mutual funds. In this way, businesses have to call on a valuation expert once a year in order to enable staff to exercise their early exit rights. “This would be equivalent to giving a severance bonus to staff who resign before the LBO is wrapped up” according to one manager who has refused to put an FCPE fund in place primarily for this reason. However, looking beyond the tool's constraints and lack of flexibility, there is also an issue with the actual philosophy of employee shareholding. “Not all staff are destined to become shareholders”, points out Michel Pic (2), head of Frans Bonhomme, the French plastic pipe and joint market leader, who came through his fifth LBO in 2005 with Cinven. The number of employees involved in the successive operations grew from four for the first LBO to | Special Issue | August 2009 | PRIVATE EQUITY MAGAZINE

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FOCUS 100, 400 then 700 out of 2,000, with the creation of a company of employees negotiated with the AMF.

Risk associated? “During the third LBO, we saw a high level of demand: some staff even wanted to invest 10 years wages!”, reflects the chairman of Frans Bonhomme, who had to set strict rules to curb their interest and above all highlight the risks associated with shareholding. Indeed, the leverage effect works both ways, and a downturn in the economic environment can take a company mutual fund's value down to zero and employees' savings to ashes. That is why the unions balk at approving this tool, which involves a risk on two levels for staff: in terms of their jobs and their assets. “We are against this ecumenism, which wants everyone to become shareholders”, sets out René Maury, chairman of CDC Capital Investissement. “In our investments, we have always sought to open up the circle of shareholders to all members of the board of directors and managers of the different business units, but not to general staff, for whom other forms of profit-sharing are more appropriate”. A rule that has seen one exception this summer with the LBO on Socotec, the building inspection services company which was fully owned by

“Part of the capital gains should be able to be transferred to staff, taxed up until now under the capital gains system rather than as wages. In a difficult economic climate, tensions surrounding the sharing of capital gains might intensify” Pierre de Fouquet (Afic) some of its staff. In this case, keeping employee shareholding at a minimum of 25% of the capital was a condition “sine qua non” for the deal. “However, the AMF has called for the previous FCPE fund to be wound up and a new one created, which is going to take six months!”, explains the outraged René Maury.

KARAVEL-PROMOVACANCES: MANAGER REFUSING TO SET SAIL WITHOUT HIS STAFF Opening up the capital to all members of staff as of the first LBO is not a common event. Even less so when this is instigated by the manager. But this is because the manager in question, Alain de Mendonça, is not your usual manager. Indeed, the founder of the Karavel-Promovacances group at the beginning of the 2000s “was left with a bitter taste from its sale to Opodo in 2005, because only a dozen or so executive managers actually benefited from this sale”. To some extent, the MBO led by Barclays PE at the end of 2007 offered him an oppor-

tunity for redemption. “I wanted the young people who take the train to commute in every morning to be able to invest 500 euros and hope to gain 20,000”, confides, not sanctimoniously in any way, the head of KaravelPromovacances, who admits that he is not very at ease with the negative view of LBOs in the collective imagination. So there we have the “noble” intentions, but in the harsh reality of the crisis, is there not a risk of misleading staff about illusory gains? “Naturally, we organised information meetings in order to clearly set out the

dangers of shareholding to staff”, retorts Alain de Mendonça, who above all does not want to embark his staff on a hazardous venture. “The LBO is very reasonably leveraged and 2007 was already seeing the end of the fabulous valuations. So, when Barclays exits in four or five years’ time, it can only logically be in a more favourable economic environment”.

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Alain de Mendonça, Karavel-Promovacances

Shareholding culture In certain sectors, such as building and civil engineering, the employee shareholding culture has been around long before the funds’ came on the scene. “When employees who earn barely more than the minimum wage invest 1,000 euros in their company, this is a very strong symbol of confidence, trust and identification”, explains Xavier du Boÿs, chairman of the management board of Kiloutou, in which some 200 members of staff already held nearly 7% before the arrival of Sagard in 2005. In connection with the LBO, the equipment rental firm expanded its shareholding to include one quarter of its workforce (450) through a project called Puissance 3. “Rather than a top-up company contribution, we preferred to set up a system with advance financing on profit-sharing, which is more in line with the shareholding spirit”, adds Xavier du Boÿs. The 1.25 million euro tranche was oversubscribed, but the company did not want to take it any further in order to avoid having to carry out public offering proceedings. This much talked-about company mutual fund would also benefit from being simplified again, to avoid giving further arguments for the funds and managers that are not particularly inclined to sharing. ■ Houda El Boudrari (1) Source: article from Les Échos “Davos ou la fin des certitudes”, February 2, 2009 (2) Roundtable organised by Premier Cercle and sponsored by Skill Capital on “LBO, sharing value” on December 16, 2008.

MANAGEMENT PACKAGES, MOVING TOWARDS A REALIGNMENT OF INTERESTS?

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1) the managers must be given clear incentives, which represents a guarantee of success; 2) they have a form of nuclear deterrence since if they are not happy, the banks do not lend. While actual use of this nuclear weapon is theoretical, since it is mutually destructive, its possibility does influence negotiations”, sums up Hervé Thibaut de Maisières, cofounder of LBO Managers. There is not strictly speaking one single management package model, but experience show that “practices are tending to become standardi-

sed” according to Hervé Couffin, co-founder of Callisto and management package consulting specialist. In a primary buy-out, managers invest between one and two years of net wages after tax to hold an average stake of around 10%. In a secondary LBO, they plough back between 40% and 70% of their net capital gains to sometimes acquire up to 30% of the capital. Managers access a fraction of the capital gains generated by the fund, provided that the fund achieves the internal rate of return (IRR) or

investment multiple (ratchet) expected. In this way for instance, a fund may decide to award additional compensation as soon as the IRR exceeds 15% or 20%. But these thresholds still need to be passed. “The thresholds selected for triggering the ratchet up until recently were raising concerns”, points out Hervé Thibaut de Maisières. “We are starting to see arbitrages in favour of revising thresholds downwards, compared with a smoother retrocession rate”. The downturn in the economic environment has

also resulted in longer holding periods, and therefore lower exit IRRs, which is encouraging managers to index the ratchet against the multiple rather than the IRR as was previously the case.

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he flood of management packages is nearing an end”, confirms the delighted Benoît Bassi. The chairman of Bridgepoint has always denounced the drift in practices encouraged by some of his peers who try to win over managers at any cost in order to seal the deal. While the balance of power has been in favour of managers for the last few years: “the scope continues to be influenced by the competition between funds and it will always be dominated by two elements:

Thibaut de Maisières, LBO Managers.

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PRIVATE EQUITY MAGAZINE | August 2009 | Special Issue |

NDARY SALES SECONDARY SALES PLACEMENT GLOBAL FUND PLACEM E EQUITY PRIVATE EQUITY PRIVAT TURING FUND RESTRUCTURING FU DARY SALES SECONDARY SALES S GLOBAL FUND PLACEMENT GLOB UITY PRIVATE EQUITY PRIVATE EQU UCTURE INFRASTRUCTURE INFRA ND RESTRUCTURING FUND RESTR NCING PORTFOLIO REFINANCING P MENT GLOBAL FUND PLACEMENT G RUCTURE INFRASTRUCTURE INFR RIVATE EQUITY PRIVATE EQUITY P ES SECONDARY SALES SECONDAR TRUCTURING FUND RESTRUCTURIN Delivering solutions for our clients and counterparties since 1988. Campbell Lutyens brings independent advice, global access to capital and a team of more than 45 executives, advisers and staff to help clients realise their goals in private equity and infrastructure. Please feel free to contact us: Campbell Lutyens & Co. Ltd 3 Burlington Gardens London W1S 3EP Tel +44 (0)20 7439 7191

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PROJECT FINANCING

Infrastructure fund

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ho can fail to have been surprised to see the Australian group Macquarie suddenly appear on the French landscape to take up a majority stake in the French Paris-Rhine-Rhone motorway network alongside Eiffage. The French State, which had paved the way for private investors to come on board through the private-public partnership (PPP) following the privatisations in 2004, found itself faced with the ignominious conclusion that there were not any French players on infrastructures. The main French banks immediately launched dedicated funds. However, outside of France, Anglo-Saxons had not been waiting for French privatisations to seize the opportunities opened up by this new asset class. On the one hand, the World Bank puts global infrastructure financing requirements at some 53 thousand billion dollars, while governments, paralysed by their budgetary constraints, are turning more than ever to the private sector. On the other hand, this asset class is defined by its stable and predictable EBITDA, strong entrance barrier and major investments. In this way, Goldman Sachs, JP Morgan, HSBC, Crédit Suisse and Deutsche Bank very quickly followed in Macquarie’s footsteps to structure funds of several billion. This interest then spread to private equity funds, able to raise high global commitments: KKR, Carlyle, Blackstone, CVC Partners, and even 3i. In total, 200 vehicles had already raised one hundred billion dollars between 2006 and 2008, according to Preqin.

Appeal of long-term LPs Certain institutionals like pension funds, retirement funds and insurance companies have realised the relevance of aligning their investments on their profiles for long-term commitments. “Long-term LPs are willing to invest with IRRs that are not as high as on LBOs, but provided that there are still stable and predictable returns”, highlights Renaud de Matharel, who heads up the Cube Infrastructure fund. A sign of the times, Partners Group has published a memo(1) setting out the merits of infrastructure’s defensive nature. In this way, the portfolio of five Australian funds investing in mature assets is outperforming the bond market by 500 bp, with net annual IRRs of 12 and 11.7% over the last five and 10 years. Which more or less gives this asset class its profile, with some investors talking more of a range between 10 and 13%. Partners Group concludes “that an infrastructure portfolio represents a good strategy for balancing the overall portfolio set against a backdrop of limited visibility”. On average in Europe, the allocation of LPs in infrastructure stands at 2% today. However, French institutional players such as CDC, CNP and Crédit Mutuel still seem to be reluctant to make a commitment. “The French market represents barely 15% of

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PRIVATE EQUITY MAGAZINE | August 2009 | Special Issue |

our investment capacity”, observes Patrick Petit, chairman of the placement agent Global Private Equity. Whereas according to Preqin, 43% of institutionals today treat infrastructure as an allocation class in its own right, separate from real estate or private equity. However, the first funds have tended to present the asset class to LPs based on a similar profile to private equity. And yet, its risk-return ratio has proven to be more complex. “This initial model has been a mistake from the start”, explains the placement agent John Campbell (Campbell Lutyens), who is regularly in close contact with more than 500 institutional players around the world.

Differentiated profiles Starting off from this assessment, industry professionals have differentiated between two markets. The long-term “greenfield” market (new infrastructures, PPPs, social infrastructures), on which capital gains are achieved as the level of risk decreases. “We are not thinking so much in terms of EBITDA and exits, but more value creation and continuous cash flow over the long term”, explains Thierry Déau, who is in charge of the green-

ds

Previously in the LBO’s shadow, has unlisted infrastructure now become the new drink of choice for investors? Because it is good form to move away from the idea of short-term capitalism today, its stable profitability combined with its social benefits make it virtually an overvalued asset class. In any case, the ball is open. It is now up to the debutants to earn their stripes. (N°46. JUNE 2009)

building their future PAR BENJAMIN L’HOIR

field fund Méridiam. “Not to mention the multiple, the return is calculated over 30 years for PPPs”. The other market is known as “brownfield” (acquisition of existing assets, privatisation, concession), characterised by quicker returns on investment, and therefore closer to the spirit of LBOs. In France, the generation of players that has emerged since 2004 has specialised on a still small and emerging market. On Greenfield operations, the two pioneers have been FIDEPPP (200 million euros), launched by Natixis-Caisse d’Épargne, and Meridiam (600 million euros). The latter, coming from Crédit Agricole Private Equity, has specialised on the niche for long-term PPPs (25 years) with consistent risk profiles and inflated cash flow over the long term. Barclays PE has also taken up a position very early on in the UK, then, from 2005 in France and Continental Europe, on social infrastructures and renewable energies (2 billion euros in assets under management). On the brownfield market, we can see players like AXA Infrastructure (1.3 billion euros), AXA Private Equity’s dedicated fund, Cube Infrastructure (targeting 1 billion, with 250 million injected by Natixis) and more recently Antin Infrastructure (target: 1 billion euros), which has already received 300 million from its sponsor BNP Paribas. “Typically, brownfield operations take place when there is no longer any construction risk and part of the traffic risk has stabilised”, summarises Paul Lignières, a partner in the firm Linklaters.

French market still green “France is a very attractive country, the market is dynamic and the public concessionaire is committed. Two years ago, there were not enough projects. Today, it is the other way round”, rejoices Vincent Levita, head of Infravia, OFI AM’s dedicated fund. Around 15 PPPs are said to be in the pipeline, with seven or eight over the one billion mark: Reunion Tram-Train, Tours-Bordeaux TGV high-speed train line (7.5 billion), SeineNorth Europe Canal, Pays du Nord-Brittany TGV high-speed train lines, and more. However, since it is at the start of the cycle, the French PPP market is not brown enough for creating opportunities for acquisitions. Nevertheless, a trend seems to be taking shape: European utilities, driven by community regulations, could embark on programmes to sell off their assets. AXA Infrastructure, joining forces with the Italian fund F2i, signed an agreement in May to acquire 80% of Enel Rete Gas, valued at 600 million euros, from the Enel Group. “This deal sends out several positive signals to the market: the return of debt (over one billion), the possibility for a cross-border operation, | Special Issue | August 2009 | PRIVATE EQUITY MAGAZINE

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FOCUS "At the time we launched Antin infrastructure, a one billion dollars target fund was considered as a mid-market one". Alain Rauscher, CEO of Antin Infrastructure

and the fact that industrial operators are willing to transfer a majority of their capital over to institutional players”, outlines Mathias Burghardt (AXA Infra). “Today, there are fewer active funds and competition is less intense. Investors are virtually able to choose their acquisition operations”, he adds. Is the development of such secondary opportunities going to whet the appetite of LBO funds?

Window of opportunity for LBO funds? For Thomas Courtel, a partner in the firm Gide Loyrette Nouel, “the modest size of equity tickets and the low level of profitability still represent natural and structural barriers that have held back private equity funds. In the UK, the authorities have integrated the idea of returns for private investment with attractive IRRs. It is still badly perceived in the French public arena”. Today, in view of the French stimulus plan and calls for tenders on projects for over one billion, equity tickets are going to be higher. “In September, we will see whether foreign private equity funds will dare take up positions”, wonders Thomas Courtel. On historically more mature markets, funds such as TPG Capital, Carlyle and GIP (Crédit Suisse) have been competing over the past few years for major acquisitions abroad. But this appetite could be fuelled by the economic environment. Since the start of the crisis, “the general ambitions for raising funds have been revised down significantly for more reasonable objectives” acknowledges Patrick Petit. Even in the US, where the Obama plan has led to unlisted enthusiasm for “infra”, KKR has had to content itself with 4 billion for a vehicle that was initially announced at 14 billion dollars.

Resilience put to the test On the financing side, the impact of the credit crunch has been felt slightly later than for LBOs. “The percentage of debt awarded by lenders is tending to become less, increasing the size of consortiums and making negotiations more difficult”, observes a specialist. And mechanically, pricing for debt has climbed, ranging from 100 to nearly 300 bp. “Today, the level of equity demanded has increased, even for PPPs, guaranteed over the long term, reaching 12%”, confirms Wilfrid Aoustin de Grant Thorntorn. “And operations that also have a demand or occupan-

"Competition is less intense as there is still few proactive funds. Investors can almost select their deal flow". Mathias Burghardt, Head of Axa Infrastructure 24

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DOMESTICATING THE PUBLIC AUTHORITIES ince the public authorities are naturally focused on the continuity of public services, a pure investor position, with an exit from the project company over a relatively short horizon compared with the term of the contract, entail a risk of arousing their mistrust”, warns Matthieu de Varax, a lawyer at Mayer Brown. Indeed, the public authorities' frame of reference is very different from that of the private sector, according to most of the private investors already accustomed to the practice. Under a public-private partnership, “value creation also involves establishing a trust-based rela-

“S

tionship with the local contracting authority, which is above all interested in the quality of the public service operations”, confirms Renaud de Matharel, head of the Cube Infrastructure fund. The public authorities are still attached to an operational operator image. Especially when it comes to revising rates and rental charges for concessions. And yet, since the 1970s, certain motorway concession agreements have been renegotiated more than a dozen times. As such, it is vital to ensure that there is not any break in the continuity of the service provided…The political and national dimension can also be fatal for candidates

who have not chosen to form an alliance with a local player. The most obvious example is still Saur’s takeover. Macquarie, after announcing an exclusive deal, was in the end not chosen faced with the efforts of many officials who were against the Australian's acquisition. In this way, the CDCAXA IM consortium ended up acquiring the company from PAI. “We have developed strong ties at local level, whether with the authorities or other investors and industrial players on club deals”, retorts Arthur Rakowski, the European head of Macquarie, which is well aware of what is at stake with cultural issues. ■

cy risk, the ratio's definition will be even more cautious”, adds Alain Grandel. However, the specific issue with infrastructure does not necessarily come from the debt itself, but rather its maturity. “On the whole, the projects move forward more slowly, but are not called into question”, seeks to reassure Daniel Benquis (EY TS). And yet, debt lines from 25 to 30 years have melted away like snow in the sun, while PPPs are trying more than ever to be the catalyst for the economic recovery. “The trend is for miniterm financing, between three and five years on the brownfield market, while looking for financing over seven years on greenfield”, specifies a banker. In its context, the action by the public authorities should be decisive in terms of freeing up financing. The EIB would be willing to increase its allocation by 6 billion a year. In France, the stimulus plan provides for 26 billion euros, including 10 billion in State guarantees for 80% of a project company’s debt. For the time being, there are not any projects about to be released. But according to Partners Group, project financing should be among the first to start up again once the credit market stabilises. ■

INSTITUTIONALS, COMPETITORS OR PARTNERS? ertain institutionals, such as North American pension funds, particularly attracted by infrastructures, have gradually decided to develop a direct approach and are no longer hesitating to keep infrastructure assets for 30 years. OMERS was one of the first to set up a dedicated structure, Borealis, representing some 8 billion Canadian dollars, in order to invest in infrastructure assets. First on this continent, then in Europe, where an office has been opened in London. Highly opportunistic, the Canadian pension fund is notably part of a consortium of other pension funds bidding to take over Gatwick airport in London, estimated at over two billion euros. The seller, British Airports Authority, is itself partly owned

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by the Caisse des Dépôts du Quebec. “Certain large institutionals are no longer even looking at funds, but investing directly”, observes Patrick Petit, head of the placement agent Global Private Equity. Elsewhere, sovereign funds from Scandinavia (ABF, APT), the Middle East (Adia) or even the government of Singapore and more cautiously Dutch institutionals have also started investing directly in their own countries. “Some have done so in response to the management costs of certain private equity funds that were considered to be excessive”, stresses the placement specialist John Campbell. “This attitude is making it more necessary for management companies to set out their independence in relation to the merchant banks

they came from”, insists Alain Rauscher, CEO of Antin Infrastructure Partners, primarily owned by its managers. In this way, Leo de Baever, the head of AIMCo, one of the major Canadian institutionals, has called on his peers to choose this path if they “have the capacity to organise themselves”. However, “certain institutionals, particularly Canadian ones, have experienced some disappointments and have already made a turnaround”, highlights a specialist. “Our argument involves showing them that investing in a fund enables them to have privileged access to deals that they would not have had otherwise”, indicates Patrick Petit. And for the time being, these players seem to be receptive. ■

THE STORY

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FRET CARGO

World Freight Company, a particularly rapid build-up In three years, World Freight Company, which sells cargo hold capacity for airlines, has become the global market leader. The story of a consolidation that has been like microsurgery. (N°40. NOVEMBER 2008) rouping dozens of small grocery stores together and making a supermarket chain out of them”. With this prosaic approach, François Nicoly, the managing partner in charge of LBO activities at Investors in Private Equity (IPE), describes the creation of the World Freight Company (WFC) group, the leading general sales and services agent (GSSA), selling freight cargo for airlines. Starting off from a fragmented sector and consolidating it through build-ups represents a tried and tested recipe for investment capital. But when this consolidation spans 20 countries, with around 40 legal entities taken over in record time, this becomes a very delicate operation. The tightrope walker in this story is called Pierre Brunet and this was not his first time. Back in 1998, this former advertising executive (he made his debut with the Express Group in 1984), transformed into a serial entrepreneur, had already brought this still “cottage-industry” activity out of the cargo hold and made it a genuine industry. At the time, he created ECS (European Cargo Services) based on the activities of the French firms Globe Air and “

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Aéro Cargo, before rapidly floating it on Paris’ Nouveau Marché in December of the same year. However, the ambitious entrepreneur did not hang around too long at the helm of ECS, and sold off his shares (52%) in 2000, believing that the market was not mature enough for the large-scale consolidation he had been dreaming of. “It was too early, we were just at the beginning of the deregulation of the aviation market, Air France had not been privatised, and the euro had not yet been introduced”.

An incredible melting pot But his plans had only been on standby. Three years later, Pierre Brunet tried again, bringing the team from Investors in Private Equity on board, won over by his visionary talent and his knowledge of the business. December 2003: the agreement was signed. The aim: creating a global group, nothing less. “The idea was to start off with a large structure that would make it possible to aggregate small units, in order to save time”, recalls François Nicoly. Except that structured companies in this sector were few and far between. Barely a few “minimarkets” to get stuck into to take up IPE’s managing

PRIVATE EQUITY MAGAZINE | August 2009 | Special Issue |

landmarks > 2003 Agreement signed between IPE and Pierre Brunet to create WFC. > 2004 Mirrair Group (Zurich) and TAS (Roissy) acquired. > 2006 Air Logistic (19 legal entities) acquired and carve-out on two thirds of the group. > 2007 Air Support, Weco and Airborne Zygene acquired. > 2008 Exit from IPE in a secondary LBO for Acto Mezzanine, Idi and AXA PE.

partner’s “grocery store” metaphor: “In Europe, out of the 100 or so companies that could be identified within the sector, only four of five had revenues of over 30 million euros”. The team therefore decided to kill two birds with one stone by setting its sights on two targets in June 2004: the Swiss-German Mirrair, which had revenues of around 60 million euros under its commercial brand ATC, and the French firm TAS (Transport Assistance Services), with just 10 million euros. Enough to create the framework for the liner, but the hardest was still to come. With no time to bind the two acquisitions together, it was already necessary to move onto the next targets. And once again, sorting through them proved to be hard work.

Bringing highflying managers on board Main difficulty: finding manages capable of tracking, detecting opportunities with real potential and looking to spread their wings, and steering clear of fearful profiles attached to their small grocery stores and wary of any change. “This criterion was especially crucial at the beginning, since the major build-up operation was already complicated on its own, without adding further restructuring operations”, explains François Nicoly, who ensured that profitsharing mechanisms were put in place for the management teams. A basic precaution if you want to ensure buy-in among teams spread across three continents.

“Whether the target company is worth one million or one hundred, the preaquisition audits are just as complex”. Another difficulty: pre-acquisition audits are complex, time-consuming and very expensive. “Whether the company is worth one million or one hundred, the work is more or less the same”, sighs François Nicoly. When the companies targeted only have a GSSA business, that is not too bad, but when they have other related logistic activities (buying warehousing solutions, securement, pre/post-routing, handling,

WFC, created through build-ups in 2003, has rapidly established itself as the leader in its sector. The team successfully brought around 40 legal entities across 20 countries together in record time. An exploit at the time, a success today.

PRIVATE EQUITY MAGAZINE : How did you choose one another?

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P. B.: I have been working closely with private equity professionals for 20 years, so I did not have any credibility issues when faced with the financiers. However, I was also a victim of my image as a serial entrepreneur and not a long-term business manager. To set up such an ambitious project, I needed to find financiers with a lot of imagination. Quite a rare quality that I found with IPE.

F. N.: We knew one another from other deals and we immediately identified Pierre Brunet’s potential for building up businesses. The preliminaries lasted three years (the team was still at Crédit Lyonnais, since IPE had not yet been created), between the desire to build this project and the many commitments of the different stakeholders, which delayed its launch. DR

CROSS INSIGHT

Pierre Brunet (WFC) and François Nicoly (IPE) look back over the success of World Freight Company.

PRIVATE EQUITY MAGAZINE : Why did you choose a 49-51 breakdown of shares the (before the conversion of convertible bonds) in favour of Pierre Brunet?

P. B.: Because I wanted to keep control over my project and I wanted to maintain the flexibility for taking decisions that comes with a majority position. And my experience has also taught me that entrepreneurs and financiers do not share the same conception of social burden or the issue of debt.

F. N.: Over and above the congenital mistrust of entrepreneurs towards financiers, this breakdown was also justified by the benefit of only one individual entrepreneur appearing to be involved in negotiations to take over targets, while if it was too obvious that financiers were involved, this could have pushed the prices up.

PRIVATE EQUITY MAGAZINE : What was the main difficulty encountered during this build-up?

P. B.: We invested a lot on the first business, which had the advantage of already being structured and gave the impression of being very well managed. The three partners were therefore assigned to head up financial aspects for one, commercial development for the second, and the major German market for the third. Except that we had a few bad surprises.

F. N.: The chief financial officer simply skipped ship without any warning. The IPE team, and notably Olivier Poncelet, the chief investment officer and “true financier”, had to work extra hard to stand in and build the links between the group’s main two components: the Swiss-German Mirrair and the French TAS. Fortunately, our bankers understood that in this type of project, you have to accept that there is going to be a brief fluid period, without reporting, without indicators, and so on.

etc.), the transplant can be complicated by any amputations required beforehand. And that is what happened on a large scale with the Air-Logistic operation in 2006: a group which had around 20 legal entities spread across 15 countries, with two thirds requiring a carve-out. A real can of worms! “The accounts were inextricable, it took us more than six months to make the split”, explains François Nicoly. “The takeover process took a year and cost just short of half a million euros in various costs, for a total valuation of…3.5 million!” Begging the question of whether the costs and complications associated with this amorphous carve-out do not mean that creations from scratch represent a more interesting option? “The takeover has benefits on two levels, retorts Olivier Poncelet, IPE’s chief investment officer. On the one hand, we are able to inherit a base of already captive customer airlines which want nothing more than to focus on a single provider for all airports. But also and above all, the takeover enables us to take on teams that are trained and operational, rather than having fun with recruitments in Finland or Hungary”.

Moving up to cruising speed Since Pierre Brunet is the only one leading the dance, although closely supported by his financial partners, who put 10 million euros in equity in the pot to finance the acquisitions, the final bill rose to 35 million euros. The debt was raised as needs arose, and included a 7.5 million euro vendor loan. Nothing less was needed to consolidate this huge patchwork of acquisitions, connect up the IT, centralise cash management, standardise reporting systems, etc. The upside is that while the patchwork may well represent an eclectic ensemble, the world of its customers is extremely standard and consistent. Airlines are all governed by IATA standards, which implies the same contract model, the same payment system, and so on, from Switzerland to Australia and Russia, enabling profits to soar. In 2008, the group recorded around 400 million in pro forma consolidated revenues, with some 10 million in EBITDA.

The turbulence has passed The group is not planning to slow down with its growth and Pierre Brunet still has many build-ups in sight. But it is time to change co-pilots, switching from aerial acrobats to financiers who are better suited to cruising speed. IPE sold its stake to Acto Mezzanine, Idi, AXA Private Equity and Pierre Brunet, who took this opportunity to increase his interest in his group to 70%, with management owning 10%. The valuation for the secondary LBO was nearly 100 million euros. For an initial investment of less than 10 million, Investors in Private Equity pocketed a multiple of 3.5 and an IRR of over 50%. Quite a successful landing. ■ Houda El Boudrari

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THE STORY

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HIGH-TECH

L Capital plays to win with Micromania Back in 2001, L Capital speculated on the rapid development of a booming video games market by joining forces with Micromania, which is now the French market leader. After seven fascinating years, the investor has been able to choose its buyer calmly, at the height of all the financial turmoil. (N°41. DEC./JANUARY 2009)

The arrival of the new Nintendo and Sony consoles opened up a new customer base for the brand, with booming sales.

landmarks > 1983 : Micromania created by Albert Loridan, with a video games mail order distribution business.

> 1990 : First store opened in the Forum des Halles shopping centre (Paris)

> 2001 : y selling off Micromania for 480 million euros to the global video games leader GameStop, L Capital achieved the only outstanding exit during the second half of 2008. However, success is modest and glory discreet for the fund sponsored by LVMH. It may well be part of the world of luxury goods, but there is nothing bling about L Capital. No IRR announcement, no multiple publication, barely a whisper about the SME’s valuation three years ago: 220 million euros. While they may not be particularly communicative when it comes to the figures, Philippe Franchet and Eduardo Velasco can go on forever about the business itself. Which is natural, since the duo embarked on this adventure back in…2001. Well before the Wii and other gaming goddesses were greeted with the mass hysteria we can see today. At the time, the brand for “PC enthusiasts” had 80 sales outlets and revenues of 115 million euros. “It was already a fine “nugget”, which had managed to stand out from its rivals thanks to its positioning built around advice, as well as

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its pioneering loyalty building policy”, explains Daniel Piette, chairman of L Capital. Recruiting sales teams who were passionate about their products, setting up a loyalty card system to track all the transactions, tailoring the offering to each customer's profile, giving priority to new releases and blockbusters when sourcing, organising a show to bring the gaming community together (Micromania Game Show)…the brand’s success owes a lot to the marketing talents of its founder, Albert Loridan. Who was inspired primarily by the approaches adopted in the home computer sector, where he started out in the 80s, before embarking on the distribution of games in 1983 with a mail order catalogue offering 26 titles.

Expanding the target The opening of a first store in 1990, in the Forum des Halles shopping centre in Paris, marked the brand's true start. In 10 years, Albert Loridan managed to take the brand up to fourth place in the sector, behind the two mass retail giants Carrefour and Auchan, and hot on the heels of the other

PRIVATE EQUITY MAGAZINE | August 2009 | Special Issue |

pure player Score Games. However, the five to 10 stores being opened up each year were not enough to achieve critical mass, so Micromania’s founder decided to step up a gear, bringing on board L Capital, which acquired 35% of the retailer's shares in 2001. “In a market in which the concentration of suppliers was enabling them to capitalise on the scarcity aspect, it was vital to become the leader as quickly as possible”, adds Philippe Franchet. The rate of openings was multiplied by four, while the base of video gaming enthusiasts was growing exponentially. “The target was previously concentrated around male customers aged 15 to 25”, indicates Eduardo Velasco. “This age bracket has become much wider, with a growing focus on women”. The offering has been enhanced. More intelligent, less warlike games have arrived in the catalogues, while the equipment itself offers more user-friendly techniques, designs and colours. The arrival of Microsoft's Xbox, Sony’s PlayStation 2 and Nintendo’s GameCube fuelled strong demand for new releases. Which was good news for Micromania,

L Capital acquires a 35% stake. Micromania generates 115 million euros in revenues, with 80 points of sale

> 2005 : L Capital takes over, founder Albert Loridan ousted, replaced by the co-founder of Phone House, Pierre Cuilleret.

> 2007 : Dock Games network acquired: 49 stores. First build-up.

> Oct. 2008 : Sold to GameStop, the global video games market leader, for 480 million euros.

Setting a strong pace, with 40 points of sale opening each year.

A new era First change: the strengthening of the brand in town and city centres, moving away from

PRIVATE EQUITY MAGAZINE: How did you choose one another?

P. F.: To take over from a founder who had instilled his strong personality in the company's culture, we needed a charismatic business leader who had already proven his capabilities in a similar sector. Pierre Cuilleret was the right man for the job because he had admirably succeeded in making Phone House a leading telephony player before floating it in 2000.

P. C.: I had been monitoring the development of Micromania with interest. It was gearing up for a fascinating new growth phase for the video games market, with all the new fun and user-friendly platforms that were set to be released over the following three years. When this challenge was put to me, I did not hesitate long before deciding to leave my position with PhoneWarehouse, to the extent that I made a modest investment in its capital myself. DR

For the minority shareholder, this was the ideal time to float on the stock market. But not for Albert Loridan, who refused to accept this way out for his investor, even if it meant leaving the company himself. Indeed, the contract sealed with L Capital stipulated that if the company was not floated on the stock market or sold off by March 31, 2005, the investment fund could buy out the rest of the shares. Which it did. So, out went the charismatic business leader, swiftly replaced by another…charismatic business leader. Pierre Cuilleret, who co-founded Phone House in 1996, was a perfect fit for the position. The video games sector was at the same stage of development as the mobile phone business 10 years earlier, and the points in common with Phone House did not end there. “In both cases, there is a focus on the service delivered to customers, the two companies are number one on their markets, growing very strongly, both employing sales advisers who are passionate about their profession”, recounts Pierre Cuilleret. Not to mention the virtually identical specialised retail structures, ultra-concentrated suppliers and the importance of technological innovation. And above all, “opening a new store every week and doubling our size in three years, that was something I knew how to do”, adds the dashing 40-year-old. All the same, he was careful to ensure that he did not arrive with the arrogance of a serial entrepreneur so as not to upset the team in place “who were already doing a very good job”. His motto: “no revolution, just small evolutions”. Which all the same ended up shifting the focus for the company's strategy.

Philippe Franchet (L Capital) and Pierre Cuilleret (Micromania) reveal the secret of their successful marriage.

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Takeover

CROSS INSIGHT

which became the leading games distributor in 2005, with 225 points of sale, 300 million euros in revenues and a 25% market share, twice that of its challenger Score Games.

PRIVATE EQUITY MAGAZINE: How would you assess your three years of life together?

P. F.: In addition to our presence on the Board of Directors, we had interactions with the management team, primarily Pierre Cuilleret and the CFO, virtually every day. We rolled out a specific financial reporting system for debt, and Pierre’s arrival enabled us to develop our operational reporting.

P. C.: This was my first contact with the world of private equity. While we may well have agreed on the strategy, I still felt that I was being put to the test for the first six months. By the end of that, trust had been established and our work together went perfectly smoothly. I do not know what their attitude might have been if I had not delivered, but I prefer not knowing…

PRIVATE EQUITY MAGAZINE: How did your separation go?

P. F.: We would have gladly stayed together longer, but after seven years, we had come to the end of our holding period. We looked into several possibilities for takeovers, before focusing on a trade exit. GameStop offered not only the best price, but also the best prospects for the company's development.

P. C.: For us, it was essential to have a shareholder who respected the brand and who shared our desire for international development. We did not necessarily have any preferred scenario as such, but in the end, joining the global market leader was the best thing that could have happened for Micromania.

“In a market in which the concentration of suppliers was enabling them to capitalise on the scarcity aspect, it was vital to become the leader as quickly as possible”, adds Philippe Franchet, L Capital. the historical policy of opening stores in shopping centres. A repositioning confirmed by the acquisition of 49 stores from the Dock Games network, another shift away from the Group's policy for exclusively internal and franchise-free growth. Which did not prevent Micromania from forging ahead with 40 companyowned stores opening up each year. Another innovation marked the new era: for the first time, the brand tried its hand at communicating with the general public, launching TV and radio ad campaigns. With the arrival of women and more senior customers, word-of-mouth between gaming enthusiasts was no longer enough and the brand once again set out to win over this new audience. “Necessary changes pre-

empting market shares with the expansion of the target, particularly after the arrival of Nintendo's DS and Wii”, confirms Eduardo Velasco. In order to keep in sync with the demands of its customers, the retailer also started to cover the second-hand market (which today accounts for 20% of its revenues) and moved into e-commerce with the creation of a dedicated e-tailer site in 2006. Just some of the changes that made the bride twice as beautiful in three years, proudly displaying 500 million euros in revenues with 332 stores and 1,200 employees. An appealing prospect for the global market leader Game-Stop, which has taken over the controls, rewarding L Capital for its seven years of patience. ■ Houda El Boudrari

| Special Issue | August 2009 | PRIVATE EQUITY MAGAZINE

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The 128 restaurants sold off in 2006 were valved at nearly 300 million euros.

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Colony putting real estate on the menu for Buffalo Grill landmarks > 1980: first restaurant opened in Avrainville (Essonne) > 1990: 39 restaurants trading, including 11 franchises > 1994: 100th restaurant opened in Mulhouse > 1999: listed on the Paris stock exchange’s Second Marché > 1997: first international restaurant opened: Spain (Madrid) > 2004: Erich Harasymczuk becomes chairman of the Management Board > 2005: 75% of the capital acquired by Colony Capital > 2006: sale and leaseback operation carried out > 2007: company delisted > 2008: sold to Abénex (>50%), iXen (20%), NI Partners (20%), Céréa Gestion.

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In three years working with Buffalo Grill, Colony Capital has successfully developed the group’s value, capitalising on its real estate expertise among other factors, in addition to operational improvements. (N°42. FEBRUARY 2009) ollowing a trip through the American West, Christian Picart returned equipped with the steakhouse concept. From 1980 to 1990, the network grew to include around 40 restaurants. A media and legal storm in 2002, set against the mass panic surrounding mad cow’s disease, resulted in major trauma for the group, from which it has been able to recover, getting back on track for growth from 2004, after a drastic drop in earnings. The group inevitably emerged changed from this experience, from which it learnt a great deal. While its founder used to advocate “advertising on the plate”, the management team led by Erich Haramsymczuk is now more focused on better communication. With 287 restaurants, including eight in Spain, and 267 million euros in revenues in 2004, Buffalo Grill is France’s leading themed dining brand. At the age of 67, Christian Picart found himself without any potential successor within his family. The prospect of handing over the business, and the real estate portfolio to be capitalized on: two perfect ingredients for a player with two hats like Colony Capital. In July 2005, the fund man-

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PRIVATE EQUITY MAGAZINE | August 2009 | Special Issue |

aged by Jean-Romain Lhomme and Sébastien Bazin snapped up Buffalo Grill’s capital and became the majority shareholder with 75% of the group’s shares, listed at the time on Eurolist C. The offer price valued the business at 230 million euros, excluding 126 million euros in debt. A compulsory buyout offer was submitted. However, the proposal was rejected by the French securities regulator (AMF) in spring 2006, on the initiative of one minority shareholder. Despite this setback, the financial teams kept their calm and were soon at work again.

A more financial vision A strong company culture, a mix of paternalism and internal promotion sum up the spirit of Christian Picart’s group when he sold it on. However, the founder’s vision lacked a more financial and rational approach. “Giving more independence and objectivity in decisions was our primary concern”, explains Jean-Romain Lhomme, who took over as chairman of the supervisory board. With this in mind, he surrounded himself with profiles that were both operational and sensitive to the mysterious work-

ings of the LBO. Jean-François Sautereau, formerly of Sodexo and Générale de Santé, and Jean-Louis Riallin, advisor at Colony and ex-manager of a LBO backed company, became director and vice-chairman. As far as the management board was concerned, Erich Harasymczuk oversaw the business plan’s operational rollout. First initiative: building a production plant with integrated logistics and meat cutting “in order to ensure the security of the supply chain”. A major capex, identified and developed beforehand between the shareholder and management team, but which only saw the light of day in 2008 after Colony’s exit. The deployment of a classic business model followed, with a programme of 34 restaurant openings (900 jobs created). Talks with foreign partners began (Portugal, Poland, Romania, etc.). However, it was thought to be too early yet for international growth and this was left for a future buyer. And it worked. By as early as July 2006, the fund had already achieved a return on its investment. Which has not prevented the investors from looking into opportunities for growth. But how to finance its expansion without drawing on its capital? The solu-

“Six weeks later, we had presented our plans to take over the whole business, wrapped up our business plan, found our financing and signed a firm agreement”. Jean-Romain Lhomme, Colony Capital tion came about indirectly through the sale of real estate assets.

Developing the value of operational real estate Set out in the proposed takeover, the operation to sell and lease back the group’s real estate was first of all the result of analytical and informative efforts. “This major value on the balance sheet had never really been considered”, explains Jean-Romain Lhomme. The real estate assets had been valued at 140 million euros a few months be-

fore the fund’s takeover. “Convincing the operational teams of the strategic value of a deconsolidating operation was not easy to begin with”, recalls the financier. The reviews and research therefore began very early on. “We worked with the management team for four to five months in order to iron out the details of the real estate disposal project, drawing up bespoke leases and defining contractual relations with the investor”, adds Jean-Romain Lhomme. In this way, the project to sell off 128 restaurants was combined with nine-year commercial leases, renewable

PRIVATE EQUITY MAGAZINE: How did you choose one another?

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J-R. L.: While he had been looking to hand over the reins for some time, Christian Picart initially approached us with a view to selling off the real estate portfolio. As an investment fund, we were not interested in a purely real estate deal. Six weeks later, we had presented our plans to take over the whole business, wrapped up our business plan, found our financing and signed a firm agreement. Erich Harasymczuk was already chairman of the management board. A working relationship naturally took shape between us.

E. H.: The world of LBOs and investment funds, American on top of that, all seemed a little mysterious. However, Christian Picart’s firm belief reassured us. Jean-Romain Lhomme and Sébastien Bazin were very clear about their intention to continue developing the group. DR

CROSS INSIGHT

Jean-Romain Lhomme, Managing Director Europe at Colony Capital and former chairman of Buffalo Grill’s Supervisory Board, and Erich Haramsymczuk, former chairman of Buffalo Grill’s Management Board, look back over a successful partnership.

PRIVATE EQUITY MAGAZINE: How would you assess your three years of life together?

J-R. L.: As chairmen of the supervisory and management boards, our ties were very strong and very frequent from the outset. We forged a personal relationship based on trust, with mutual respect for one another’s expertise. This came about through many meetings in order to understand the business on the one hand, and on the other, to ensure that the new constraints, both banking and linked to a more institutional shareholding structure, were taken on board.

E. H.: The watchword for our relationship was trust. In addition to the monthly strategic committee meetings, we were in touch with one another almost daily for all strategic decisions. Having a financial shareholder also enabled us to question and challenge our way of doing things.

PRIVATE EQUITY MAGAZINE : How did your separation go?

J-R. L.: For three years, we carried out various structural operations that required a lot of drive, energy and time. Many operational initiatives were still underway. If we had decided to stay for another three years, we would not have been short of projects. The sale therefore went ahead in total transparency. In this way, upstream from the formal options in the sales process, we made it possible for the candidates to build personal relationships with the management team.

E. H.: Looking beyond purely financial performance aspects, the outcome was more than positive in human terms. Like Klépierre, our new shareholders were first and foremost selected with a view to respecting the strong company culture underpinning Buffalo Grill and its employees, which Colony understood very clearly.

twice, with rent indexed against the restaurants’ sales figures. The choice of a long-term operational partner was also decisive in terms of getting the management team on board. “More than the price, the quality of the partner was our criterion for selection”, confirms Erich Harasymczuk. In the end, out of several candidates, Klépierre met these conditions. Following the review and selection, it was time to go operational. Auditing some 128 restaurants throughout France required a few more months work. In the end, the real estate portfolio was valued at nearly 300 million euros. Wrapped up in May 2006, the deal proved to be very satisfactory for the financial shareholder and the operator, taking their value off its balance sheet in order to finance its growth. “In 2007, EBITDA after rent (66.7 million euros) was still higher than the 2005 level (46.8 million euros)”, concludes the delighted Jean-Romain Lhomme. This transaction led to another original partnership with Klépierre: financing through off-plan sales for the building of new restaurants. “The upside with this option was that it reduced the group’s need for further debt in accordance with the covenants set by the lenders”, explains the former chairman of the supervisory board. A healthy attitude to deleveraging, in line with the group recapitalisation policy that first began in 2005 and was launched again in 2007.

Withdrawal, exit, IRR The success of these structural operations and the group’s performances enabled Colony to complete Buffalo’s delisting in order to take 100% control. The share, which had been stagnating at around 20 euros since the AMF’s ruling that the bid was inadmissible, rallied strongly from March 2007. In the end, the compulsory buyout offer was backed by the minority shareholders, then authorised by the AMF at a price of 32 euros per share, after the payment of a 16.99 euro dividend. Having come full circle, the time had come to hand over the reins. After three intense years which had enabled Buffalo Grill to increase its revenues by 22% and its EBITDA by 37%, Colony was looking to make an exit. While not exactly accustomed to working alongside private equity funds before 2005, the management team chose to “go for seconds” with the Abénex Capital, iXen and NI Partners funds. “In the end, the presence of financial shareholders enabled us carry out quite a healthy analysis, challenging our ways of doing business”, admits Erich Harasymczuk, who has since handed over the chairmanship of the management board to Jean-François Sautereau, in order to take a bit of a step back. A beautiful declaration to his previous shareholder, which, following the sale, recorded an IRR of 90% with a value more than eight times Benjamin Lhoir the group’s EBITDA.■

| Special Issue | August 2009 | PRIVATE EQUITY MAGAZINE

31

A

THE STORY

BIOTECHNOLOGY

METabolic EXplorer shakes up the chemicals world Set against the growing shortage of fossil resources, the Clermont-Ferrand-based biological chemicals company aims to offer an alternative to petrochemicals by producing in another way, within a more environmentally-friendly framework. Following a successful IPO in 2007, it can always count on its VCs to help it take a further step forward. (N°44. APRIL 2009) n 1999, Benjamin Gonzalez, a biotechnology engineer trained on the Cézeaux scientific campus near Clermont- Ferrand, founded METabolic EXplorer with Luc D’Oriol, co-founder of Genset. Based on his work on the bacteria genome, this young entrepreneur (28) is looking to develop, by biological means, non-pathogenic microorganisms capable of efficiently producing substitutable chemical compounds from plant-based raw materials… An alternative to traditional complex, expensive and polluting chemical procedures, which use the principle of industrial fermentation: “the initial aim was to study the bacteria’s metabolic path, removing any unnecessary genes, in order to make it more efficient”, sums up Benjamin Gonzalez. To start up its business, the company was helped by the Sofimac regional fund, which awarded it 300,000 euros. In November 2000, following a first 18 months in the premises of an Inserm unit, it moved to the Saint-Beauzire bio hub to

the north of Clermont-Ferrand. At the same time, an initial 1.5 million euros were raised, financed by Seventure and Sofimac. The financiers carried out a commercial and strategic audit of the company, which revealed that while the post-oil niche represents the right market, the original model, which was to sell the company’s metabolic engineering services to industrial chemical firms, was not going to create a lot of value for the shareholders.

I

DR

Bacteria cultivation and optimisation (see below) lie at the heart of METEX’s business model.

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PRIVATE EQUITY MAGAZINE | August 2009 | Special Issue |

The company then realigned its strategy, focusing back in on the development of “bioproducts” with a view to selling them externally once they have been developed. Since he disagreed with the shareholders, Luc d’Oriol left the company and Benjamin Gonzalez was appointed chairman and CEO. Since the new business model required more resources, a second round of 6 million euros was raised in 2002 with Crédit Agricole Private Equity (lead) and Viveris Management as the new arrivals. The same year, Philippe Soucaille, a professor at INSA de Toulouse, specialised in developing chemical products using clean and renewable raw materials, was recruited as the chief scientific officer. His arrival represented a major scientific guarantee, since, for the American firm Genencor and as requested by DuPont de Nemours, he had previously overseen the design of the strain that has made it possible to produce 1.3 propanediol from glucose, a basic chemical

compound. In 2004, a first industrial milestone was passed for methionine, an amino acid used in animal nutrition and pharmaceuticals, mass produced by chemical synthesis from an oil derivative, propylene.

On track for industrialisation METabolic EXplorer then made the daring gamble to “auction” this technique: “we had targeted several potential partners on the value chain”, recalls Paul Michalet, METabolic Explorer’s chief financial officer. “Producers of bio-resources looking for outlets, chemists producing identical compounds to ours, but using a conventional approach, and also the end users for such compounds”, he adds. Having shown “proof of interest” to the Auvergne-based business, the companies submitted their bids, and in the end Roquette, one of the world’s leading starch producers, was selected. “This French family group, whose culture was similar to our own, had the profile that was best suited to the company, with the effective management of raw materials, considerable fermentation capacities and major international know-how”, explains Paul Michalet. Proof of its interest in METEX, Roquette signed two partnership agreements in 2006, one for methionine and another for glycolic acid (used in the production of cosmetics or biodegradable plastics) and bought into the company’s capital, following a third round of fundraising for 5 million euros.

Becoming a player in its own right Enough funds to finance the industrialisation of the techniques and the development of other bioproducts. However, the idea of floating on the stock market took shape in the shareholders’ minds. “The company had enough to move ahead for three years before another round of fundraising, but the partnership with Roquette, which was further strengthening its credibility with the chemical industry, gave it a window of opportunity to raise capital and move a little higher up the value creation scale”, explains Philippe Guinot, senior partner at Crédit Agricole Private Equity. Indeed, with additional resources, METabolic EXplorer was able to consider moving beyond the stage of supplying technologies and licences to become a biological chem-

of several thousand tons. The most advanced company-owned product, 1.3 Propanediol, which is useful for the production of textile fibres, polymers and coverings, has already been covered by an agreement to work with the French Petroleum Institute (IFP) for using glycerol, a by-product from the production of biodiesel, as a raw material. Above all, thanks to floating on the stock market, the company has major financial visibility, with 56 million euros in free cash, while it is gearing up for the most intensive phase in its development. Which is enabling it to embark on talks with major industrial players without feeling inferior in any way, looking to create joint ventures on target markets, such as Latin America, Asia, the US and Europe, and to imagine one day producing products for day-to-day life that are manufactured in an environmentallyfriendly way with “METEX Inside”. ■

François-Xavier Chapelle

DR

“With our techniques, we provide a more competitive solution for each of the main categories in the biochemical industry in order to reduce their dependency on fossil raw materials”, Benjamin Gonzalez, chairman and CEO of METabolic EXplorer

> 1999 METabolic Explorer founded

> 2000 1st round of fundraising for 1.5 million euros (Sofimac Partner and Seventure)

> 2002 2nd round for 6 million euros (CAPE and Viveris Management)

> 2005 Industrial agreement sealed for an exclusive global license with Roquette

> 2006 3rd round of fundraising for 5 million euros (Roquette enters the capital)

> 2007 Floated on Euronext

> 2008 Five products in preindustrialisation

> 2009 Industrial pilot being built

CROSS INSIGHT Benjamin Gonzalez (METabolic EXplorer) and Philippe Guinot, Senior Partner at Crédit Agricole Private Equity, look back over METabolic Explorer’s success. PRIVATE EQUITY MAGAZINE: How would you analyse Metabolic Explorer’s success?

The adventure gains pace Armed with these arguments, METEX successfully carried out one of the best biotech IPOs in 2007, raising 60 million euros on Eurolist B. At the end of the capital increase, the VCs, which had put forward 13 million euros in the first three rounds of fundraising, held 60% of the 20 million shares in the company, valued at 162 million euros, giving them an excellent capital gain. Nevertheless, most decided to stay in the capital at the end of the lock-up, believing that the company was only at the start of its adventure. In just one year, from the end of 2007 to the end of 2008, its workforce grew from 68 to 95 employees, and METEX’s five chemical compounds, representing an estimated market of over 14 billion dollars and protected by 181 patents in 49 countries, have all moved into a prepilot industrial phase. An industrial pilot, which is currently being built, is scheduled to be started up for the end of 2009: it will make it possible to validate, by continuously producing hundreds of kilos of products, the cost price for each fermentation and purification stage in order to provide future partners with “process books”, making it possible to plan the production

B. G.: Our business model, which combines technology licenses with an industrial partner, and the search for joint-venture agreements on high volume markets, has enabled us to rapidly generate revenues and achieve profitability.

P. G. : This success is proof that a company can create a lot of value for its shareholders without raising huge amounts of capital. The management team, who knew how to successfully surround themselves with the right scientific and industrial capabilities, is fully aware of the solutions that the market is looking for.

DR

landmarks

icals player in its own right, through jointventure agreements with limited exclusivity linking it to partners with which it would share revenues from its “bacteria factories”. “With our techniques, we provide a concrete and more competitive solution for each of the main categories in the biochemical industry in order to reduce their dependency on fossil raw materials, which can account for up to 80% of their costs”, confirms Benjamin Gonzalez .

DR

In 10 years, Benjamin Gonzalez has made METEX a pivotal player on the white biotechnology market*.

PRIVATE EQUITY MAGAZINE : When do you hope to sign your first partnership agreement for one of your company-owned products?

B. G.: We are confident that we will be able to meet the schedule mapped out at the time of our IPO, with the first operational units to be obtained between 2010 and 2012. The talks are complex and we want this partnership to be a benchmark for the chemical industry.

P. G.: The company’s effective management of its cash means that it is able to calmly negotiate a partnership, and the closer it gets towards the finished product, with its industrial pilot starting up, the more our value grows.

PRIVATE EQUITY MAGAZINE : What has the contribution of funds involved?

B. G.: Philippe, who has held executive management positions in the pharmaceutical industry, opened up his networks to us and successfully rallied the historical shareholders during the IPO.

P. G.: Our role is to provide a constructive and critical perspective, without putting ourselves in Benjamin’s place. He remains the only captain on board, handling all negotiations and he never accepts anything that he does not firmly believe in.

* White biotechnology: application of biotechnology for the production of convenience chemical products (as opposed to red biotechnology - for pharmaceuticals - and green biotechnology- for agriculture).

| Special Issue | August 2009 | PRIVATE EQUITY MAGAZINE

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A

STRATEGY

IDENTITY

PORTFOLIO

ADDRESS

KEY WORDS

Azulis Capital manages close to 600 million euros,

Azulis Capital

■ Stability

21, boulevard de la Madeleine 75001 Paris

■ Diversification

Tel : +33 1 42 98 70 20 Fax : +33 1 42 98 70 21 www.azuliscapital.fr

■ Regional networks

with nearly 28 active lines. The Middle Market Fund III fund, raised in 2004-2005, was fully invested at the end of 2007, factoring in 30 million put in reserve for reinvestments. Middle Market Fund IV is currently being raised, with 187 million euros in subscriptions, and a target of 250 million by the end of 2009.

■ Sector-based approaches

■ Independent team

Clear horizon for

Azulis Capital After more than 30 years as part of BNP Paribas, the former Banexi Capital Partenaires turned a symbolic page in its story by becoming Azulis Capital this year. Which has not in any way changed its diversified model, with a blend of development capital, OBO and buyout operations. (N°44. APRIL 2009) hile Azulis Capital undeniably sounds more “modern” than Banexi Capital Partenaires, a name that referred to the structure set up by BNP in the 70s to group its private equity activities together, the specialised mid caps fund is not turning its back on its past. In fact, far from it. While the partners have bought out the last 32% of the capital they did not yet own from their sponsor, this simply represents the planned outcome of a spinoff that began in 2004 with the acquisition of 51% of the management company's shares. And this is certainly not going to change anything for the life of the 11 managers, nine

W

DEALS ■ Saveur

In October 2007, Banexi Capital Partners and Céréa Gestion entered the capital of Saveur, which produces ingredients for the agrifood industry. With nearly €70 million in revenues, Saveur is the market leader in France and strongly positioned in Belgium and Germany. This LBO is aimed at developing the Group in France and internationally.

34

■ Martine Spécialités In March 2009, Azulis Capital and Céréa Gestion carried out an LBO on Martine Spécialités. Specialised in frozen pastries, the company, which was part of the UK agrifood group Premier Foods, posted 74 million euros in revenues for 2008. The LBO operation will make it possible to accelerate the company's development in France and abroad.

PRIVATE EQUITY MAGAZINE | August 2009 | Special Issue |

of whom have been with the firm for more than 10 years, and who are focusing more on the continuity of the strategy, steadfastly deployed since the first fund managed in 1993: investing in French SMEs, combining buyouts, OBOs and development capital (40% for the first two segments and 20% for the latter). A diversified blend that is enabling the fund to come through the crisis without weakening, despite or indeed thanks to an investment-free year in 2008, marked by two outstanding exits: Pisto and Paprec, sold respectively to the Australian Macquarie Group’s infrastructures fund and Financière Agache Private Equity. This year, Azulis Capital has been more on the

■ Prodene Klint

In April 2009, Azulis Capital carried out an OBO on Eva Group, the parent company of Laboratoires Prodene Klint, one of the French market leaders for non-home hygiene and cosmetics (liquid soap, shower gels and wipes). Prodene Klint’s revenues totalled 40 million euros in 2008, and it is also present in Germany, the US and the Maghreb Region.

■ Galedo

offensive, christening its new fund with three deals. Indeed, while it felt that valuations were too high in 2008, they have now become interesting again, even if it is not seeing any collapse in multiples.

Defensive positioning Which is not preventing it from treading cautiously by targeting sound businesses, always with a moderate leverage effect (2.9 x EBITDA on average), in sectors with relatively defensive characteristics. First up, agrifood, “from farm to plate”, on B to B and B to C, an area in which the fund has distinguished itself with the acquisition of the food ingredients producer Saveur in

In January 2009, Azulis Capital carried out a replacement financing operation on the Finag Group, which has three activities: Galedo (bathroom accessories), Bois Secs de Bourgogne - BSB (flat-pack kitchen furniture), Rossignol (metal and plastic cleaning and hygiene products). The Group recorded 50 million euros in revenues in 2008, and works closely with all of the major French DIY stores.

■ Domidep

The FCPR fund MMF III has acquired a minority interest in the Domidep Group, which manages retirement homes throughout France. Azulis Capital’s development capital operation has been carried out to finance the acquisition of new retirement homes, which will enable Domidep to become an even more pivotal player on this booming market.

2007, followed by Martine Spécialités in 2009. Other “house” sectors include retail B to C (Etam, Naf Naf, Jardiland, etc.), industry services (the equipment hire group Loxam, the oil logistics firm Pisto and the recycler Paprec), low-tech industry, health and personal care (Domidep retirement home group).

Sector-based approach The founding partners, in the same way as the associate directors and managers , each have their specialty sector, in which they strive to anticipate trends in order to plan an exit approach, often trade (two thirds of fund exits), at the end of the accompanying period, lasting on average four to six years. As the only concession to the current environment, the mid cap fund has ventured into energy and sustainable development with the OBO on the heat pump manufacturer France Géothermie in 2007. Azulis Capital has maintained privileged

600

million euros under management ties with the BNP Paribas development structure, which often takes part in Azulis’ operations, as for the jeweller Cléor from Evreux or the Lyon-based distributor of business telephony products HBP Associés. This privileged relationship has been built up over many years and is reflected in the confidence and trust of the BNP

PARTNERS

Paribas Group, which is the leading investor in Azulis Capital’s funds.

EBITDA growth Whatever the sector, and whether it is operating on a minority or majority basis, Azulis Capital aims to be a “growth accelerator”, driven by a build-up-based strategy, with 73 add-ons carried out in 15 years on the three funds’ 92 investments. “50% of our value creation is driven by growth in the company's EBITDA, with the balance due to multiple and leverage effects”, explains Michel Rowan. Growth that also enables the investor to take its equity interests up a division by building up, taking them from lower mid-caps, 20 to 30 million euros on average, to the upper range of 40 to 100 million euros, with a more diversified customer base and management team. If we add that Azulis Capital successfully sold off its stake in Paprec in May 2008, two years after joining it following an excellent 200708 financial year, thanks in part to the good level of newspaper paper prices, that it completed its exit from the oil logistics specialist Pisto in September 2008, just before the Lehman Brothers upheaval, and that three exits are planned this year, we can see that the fund should come through the crisis without too much damage. The statistics also support Azulis: in 15 years, the team has invested 540 million euros and carried out 58 exits, with an average of 2.1 times the initial investment and a gross IRR of 25%, and only two “losses”… Enough to encourage potential LPs to subscribe for Middle Market Fund IV, the fund that is currently being raised, and which was closed for the first time midway through last year, with 187 million euros in commitments collected so far. For the moment, a dozen or so new investors have been won over by Azulis Capital’s cautious and diversified strategy, following the long-standing investors, with BNP Paribas leading the way with 70 million euros. Who said that you needed to kill the father? ■ F-X Chapelle

FRANCK BOGET 60 years old, Essec, CPA, chairman of the management board. After 23 years at Banexi, he joined Azulis Capital in 2000 as a founding partner.

MICHEL ROWAN 58 years old, Ina-Paris, MBA from HEC, chief executive officer. After six years at IDI, then 10 years with the Suez Group, he joined Banexi in 1997 then Azulis Capital in 2000, as a founding partner.

CHRISTINE MARIETTE 47 years old, post-graduate DESS in finance and business, post-graduate DEA in corporate law, associate director. After nine years at Banexi, she joined Azulis Capital as a founding partner in 2000, specialised in health.

PIERRE JOURDAIN 46 years old, Essec, Engref, associate director. After working at the French Ministry of Agriculture, he moved to Banexi in 1992, before joining Azulis Capital in 2000 as a founding partner, specialised in agrifood.

EXITS Azulis Capital, which entered the capital of this major player for recycling in France with Demeter and Naxicap, with an OBO, exited in 2008, achieving a “remarkably high” IRR. Created in 1994, Paprec started off in paper recycling, before diversifying into plastics, wood and electrical or industrial waste. In 2007, the company recorded 320 million euros in revenues.

■ Pisto

Azulis Capital, which had acquired a minority interest in this oil logistics specialist with Bridgepoint Capital and BNP Paribas Développement in 1996, alongside Compagnie Nationale de Navigation, sold its stake in 2008 to the Macquarie Group for a confidential amount. The investors achieved a satisfactory multiple on this deal.

■PBM

In 2008, Banexi CP withdrew from the PBM Group, an expert in prefabricated concrete steps, taken over in 2005, selling 20% of its capital stake to the chairman and CEO Guillaume Bermond. Between 2004 and 2007, revenues climbed from 48 to 65 million euros, with EBITDA rising from 6 to 11 million euros.

DR

■ Paprec

YANN COLIGNON 52 years old, ESTP, masters in finance from HEC, associate director. After seven years at Technip, he joined Banexi in 1990, before moving to Azulis Capital in 2000 as a founding partner, specialised in the environment. The Azulis Capital team also includes: two other founding partners, André Bélard and Gilles Pérony, two more recent partners, Nicolas Cosson and Bruno Lavollé ; the senior investment managers Anthony Dubut and Anne Robert, and the CFO Donatien Noyelle.

| Special Issue | August 2009 | PRIVATE EQUITY MAGAZINE

35

FOR A COMPLETE INFORMATION, MORE DETAILS ON WWW.PEMAGAZINE.FR/FUNDRAISING

FUNDRAISING TABLES Each month, a global view of the fundraising market in Europe. Here a selection for france Please send us your information by mail to: [email protected]

TYPE

GPs

FUND

BUYOUT BUYOUT BUYOUT BUYOUT BUYOUT BUYOUT BUYOUT BUYOUT BUYOUT BUYOUT BUYOUT BUYOUT BUYOUT BUYOUT BUYOUT BUYOUT MEZZANINE MEZZANINE MEZZANINE MEZZANINE MEZZANINE SPECIAL SITU. SPECIAL SITU. VENTURE VENTURE VENTURE VENTURE VENTURE VENTURE VENTURE VENTURE VENTURE VENTURE VENTURE VENTURE FOF FOF FOF FOF BUYOUT FOF BUYOUT FOF BUYOUT FOF MEZZA. FOF MEZZA. FOF INFRASTRUC. INFRASTRUC.

FONDATIONS CAPITAL CRÉDIT AGRICOLE PRIVATE EQUITY AZULIS CAPITAL CIC LBO PARTNERS IPE LBO FRANCE OCCAM CAPITAL FINAMA PRIVATE EQUITY NEXTSTAGE ICEOS SAS ICSO PRIVATE EQUITY NBGI PRIVATE EQUITY UI GESTION TOCQUEVILLE FINANCE ALTER EQUITY NEF CAPITAL ETHIQUE MANAGEMENT EUROMEZZANINE LFPI ARGOS SODITIC TIKEHAU INVESTMENT MANAGEMENT CÉRÉA GESTION EAST CAPITAL VERMEER CAPITAL PARTNERS SOFINOVA DEMETER PARTNERS CDC INNOVATION SAS SGAM AI PRIVATE EQUITY TRUFFLE CAPITAL SERENA CAPITAL ELAIA PARTNERS LC CAPITAL SIGEFI PE SIPAREX TECHFUND EUROPE MANAGEMENT ENTREPRENEURS VENTURE GESTION NEWFUND MANAGEMENT AXA PRIVATE EQUITY AGF PRIVATE EQUITY ACG PRIVATE EQUITY CAAM CAPITAL INVESTORS AXA PRIVATE EQUITY LA FINANCIÈRE PATRIMONIALE EUROPÉENNE ODDO ASSET MANAGEMENT AGF PRIVATE EQUITY ACG PRIVATE EQUITY NATIXIS EIL OFI INFRAVIA

FONDATIONS CAPITAL FUND I CACI III MIDDLE MARKET FUND IV CIC LBO FUND II IPE EXPANSION FUND HEXAGONE III OCCAM I ACTO CAPITAL II PME CHAMPIONNES II ICEOS CAPITAL ICSO 2 NBGI PRIVATE EQUITY II M.I 5 TOCQUEVILLE INVESTISSEMENTS PRIVÉS FCPR ALTER EQUITY SENS EUROMEZZANINE 6 FCPR LFPI MEZZANINE ARGOS EXPANSION TIM MEZZANINE CÉRÉA MEZZANINE II EAST CAPITAL SPECIAL OPPORTUNITIES FUND VERMEER CAPITAL SOFINOVA CAPITAL VI DEMETER 2 FCPR INNOVATION III SGAM FUND BIOTECHNOLOGY 2 TRUFFLE VENTURE PROGRAM II SERENA CAPITAL ELAIA VENTURES II LC CAPITAL FUND III EPICEA VENTURE II TECHFUND EUROPE II (FCPR) ENTREPRENEURS VENTURE 2 NEWFUND AXA CAPITAL EUROPE I AGF PRIVATE EQUITY HOLDING EUROPE V ACG EUROPE V CPR PRIVATE EQUITY SELECTION N° 3 AXA MIDCAP EUROPE LFPE ODDO EUROPE PRIVATE FUNDS ARIAN PRIVATE DEBT FUND I MONTAIGNE MEZZANINE CUBE INFRASTRUCTURE INFRAVIA

36

PRIVATE EQUITY MAGAZINE | August 2009 | Special Issue |

OBJECTIVES (M¤)

1050 300 250 250 250 150 150 120 120 100 100 100 100 100 50 50 750 300 150 150 130 100 90 350 200 150 150 150 125 100 100 100 100 80 80 1500 400 250 150 250 200 100 250 150 1000 300

LOCATION

FRANCE FRANCE FRANCE FRANCE FRANCE FRANCE FRANCE FRANCE FRANCE FRANCE FRANCE FRANCE FRANCE FRANCE FRANCE WESTERN EUROPE FRANCE FRANCE FRANCE FRANCE FRANCE EUROPE FRANCE WESTERN EUROPE WESTERN EUROPE WESTERN EUROPE WESTERN EUROPE WESTERN EUROPE FRANCE FRANCE FRANCE WESTERN EUROPE FRANCE FRANCE FRANCE WESTERN EUROPE WESTERN EUROPE EUROPE WESTERN EUROPE WESTERN EUROPE WESTERN EUROPE WESTERN EUROPE WESTERN EUROPE WESTERN EUROPE EUROPE EUROPE

A

GRANDS PRIX

CONTRAGULATIONS TO THE WINNERS OF “LES GRANDS PRIX” PRIVATE EQUITY MAGAZINE The awards evening took place on the 3rd of February. An audience of more than 500 professionals congratulated the best performing teams of the year on the French market, chosen by a jury of 19 recognised professionals. More details on www.pemagazine.fr/grands-prix

LES GRANDS

PRIX

2009

SMALL CAPS LBO FUND

MIDMARKET LBO FUND

Sponsored by Gatienne Brault & Associés

Sponsored by Ayache, Salama & Associés

P INITIATIVE & FINANCE

P ATRIA CAPITAL PARTENAIRES

Jean-Bernard Meurisse (left), CEO of Initiative & Finance, and Thierry Giron, managing director, received the prize of small caps fund, after a historic year.

VENTURE FUND

EXPANSION CAPITAL FUNDS

Media partner: L’Usine Nouvelle

Media partner: La Tribune

P SEVENTURE PARTNERS

P CRÉDIT AGRICOLE PE

Jean-Patrick Demonsang, CEO of Seventure Partners is awarded venture fund of the year.

NOMINATED FOR THIS CATEGORY

NOMINATED FOR THIS CATEGORY

NOMINATED FOR THIS CATEGORY

Fabien Prevost (left), president of CAPE, and Jean-David Haas, partner of NextStage, are the joint winner of the new award that distinguish expansion capital funds.

NOMINATED FOR THIS CATEGORY

DEMETER PARTNERS, EDRIP, OTC ASSET MANAGEMENT, TRUFFLE CAPITAL, VENTECH

DEMETER PARTNERS, MIDI CAPITAL, UFG PRIVATE EQUITY

LARGE CAPS LBO FUND

BEST SUPPORT Sponsored by Ernst & Young TAS

P L CAPITAL POUR MICROMANIA

P LBO FRANCE

Dominique Oger, founding partner of AtriA, was chosen this year by the jury for a well balanced year between nice exits and new acquisitions.

CRÉDIT AGRICOLE PE, MBO PARTENAIRES,

P NEXTSTAGE

Robert Daussun, head of Lbo France, awarded after a particularly difficult year for large caps.

NOMINATED FOR THIS CATEGORY

P AXA PE POUR PHOTONIS Daniel Piette (left), L Capital, and Philippe Poletti, Axa PE, are rewarded for their exemplary role in supporting respectively Micromania and Photonis.

NOMINATED FOR THIS CATEGORY

COLONY CAPITAL, 3I GESTION

PERFECTIS PE, IPO

21 CENTRALE PARTNERS, AXA PRIVATE EQUITY, BARCLAYS PRIVATE EQUITY, LBO FRANCE, L CAPITAL

COLONY CAPITAL POUR BUFFALO GRILL, INVESTORS IN PRIVATE EQUITY POUR WORLD FREIGHT COMPANY.

MANAGER LBO

LEGAL ADVISER

FINANCIAL ADVISER

DEBT PROVIDER

Media partner: BFM

Sponsored by OFI Private Equity Capital

P MAYER BROWN

P ROTHSCHILD & CIE

Sponsored by Egon Zehnder International

P ALAIN DE MENDONÇA(

)

KARAVEL PROMOVANCES

Alain de Mendonça developed qualities that make him a remarkable LBO manager.

NOMINATED FOR THIS CATEGORY JEAN-DOMINIQUE PERREAUX – AVERYS (21 CENTRALE PARTNERS), THIERRY ORTMANS – CEPL (SAGARD), PIERRE BRUNET – WORLD FREIGHT COMPANY (INVESTORS IN PRIVATE EQUITY), PIERRE CUILLERET - MICROMANIA SFMI (L CAPITAL)

P AYACHE, SALAMA & ASSOCIÉS Olivier Tordjman (Ayache Salama & Associés) and Laurent Borey (Mayer Brown) saw their respective firms awarded by the market.

NOMINATED FOR THIS CATEGORY DE PARDIEU BROCAS MAFFEI, FRESHFIELDS, GIDE LOYRETTE NOUEL, LINKLATERS, SJ BERWIN

SPONSORS OF LES GRANDS PRIX 2009:

Richard Thil, partner of Rothschild & Cie, is singled out by his peers for the second time in three years.

NOMINATED FOR THIS CATEGORY BNP PARIBAS, CLOSE BROTHERS, HAWKPOINT

P SOCIÉTÉ GÉNÉRALE The year has certainly not been easy for debt providers, but Societe Générale, represented by his managing director, Patrick Sandray, showed a strong face to adversity.

NOMINATED FOR THIS CATEGORY AXA MEZZANINE, CALYON, CIC, MEZZANIS, NATIXIS

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DEALS TABLES

KEY: TV: TRANSACTION VALUE - CV: COMPANY VALUE M&A: M&A ADVISER - D: DEBT - L: LEGAL ADVISER LD: LEGAL ADVISER DEBT - SD: SENIOR DEBT F: FINANCIAL ADVISER - A: ACCOUNTING ADVISER E: EMPLOYMENT - AS: STRATEGICAL ACCOUNTING ADVISER T: TAX - E: EQUITY - M: MEZZANINE - REV: REVENUES

Each month, Private Equity Magazine presents a selection of deals, in France or in Europe. Please send us your press releases by mail to: [email protected]

FIND ALL THE DEALS ON WWW.PEMAGAZINE.FR/DEALS

SOCOTEC (FRANCE)

ARKADIN (FRANCE)

LBO

IN: CDC CAPITAL INVESTISSEMENT OUT: FOUNDERS SECTOR: BUSINESS SERVICES TV: 400 M¤ | D: 130 M¤ | M: 50 M¤

REV: 50 M¤

SOCOTEC’S TAKEOVER BY CDC CAPITAL INVESTISSEMENT was finally wrapped up at the end of the year, with a value of nearly 400 million euros. Selected by the majority employee shareholding structure and the managers from around 30 candidates, including 3i, PAI and AXA PE, the fund is taking 75% of the capital and injecting 173 million euros in equity. For the time being, the employees and the management team will keep 20% and 5% of the shares. The acquisition is based 47% on debt, with total financing representing 4.2 times EBITDA. Taking a more detailed look, the banking pool made up of BNP Paribas, Calyon, Natixis and SG is arranging a 130 million euro senior debt (60 million euros for Tranche A and 70 million euros for Tranche B) and granting a 60 million euro bridge loan. The mezzanine contributed by AXA Mezzanine, Capzanine and IFE represents 50 million euros. This comes on top of a 20 million euros revolving credit and 20 million euros in cash. With its 4,800 employees across 185 sites in France and abroad, the Paris Region-based group is the building inspection specialist, generating 437 million euros in revenues and 36 million euros in EBITDA for 2008. After the company mutual fund has been set up, the employees’ stake may rise to 33.7% of the capital. CDC Capital Investissement: René Maury. ADVISERS IN | M&A: Natixis Finance (D. Giroux, Anne Trocme-Reinaud) - L: Freshfields - A: Ernst & Young TAS (J. Welstead) - T: Ernst & Young Société d'Avocats (A. Pierret, F. Teper) - E: August & Debouzy (Emmanuelle Barbara) - AS: Bain & Co (J-M. Le Roux), Marsh (H. d'Autichamp) - D: BNP Paribas (B. Matusiak, S. Gagey), Calyon (L. Chenain, B. Nung), Natixis (G. Rosset, A. Groussard), SG (N. de Saint-Laon) - M: AXA Mezzanine (C. Vulliez), Capzanine (L. Bénart), IFE (Dominique Fouquoire) - LD: White & Case (G. Peigney, S. Berlat), Linklaters (A. Fromion) ADVISERS OUT | M&A: BNP Paribas (F. von Marx) - L: Shearman & Sterling (J. Naquet-Radiguet), Sarrau Thomas Couders (D. de Pariente, Hervé-Antoine Couderc) - A: PricewaterhouseCoopers TS (O. Marion) F: Landwell (A. Chedal, P. P. Fisselier)

MORET INDUSTRIE (FRANCE)

LBO

IN: UFG PE (ARNAUD FILHOL, ALEXANDRE DELBY WILKES) (4%) OUT: FOUNDERS, APAX PARTNERS, CDC INNOVATION SECTOR: TELECOMS TV: 125 M¤ REV: 70 M¤ | EBITDA: 12 M¤ UFG PRIVATE EQUITY IS CONTRIBUTING 5 million euros to Arkadin and taking 4% of the capital alongside the management team, business angels and the Apax Partners and CDC Innovation funds, which came on board in 2004 and 2005 respectively, at the time of the rounds of fundraising for 6.6 M€ and 5.2 M€. Following the fundraising, also combined with a senior debt of 15 M€, corresponding to 1.2 times EBITDA in 2008, the financial investors own one third of the capital, with management holding another third, and the balance in the hands of the friends and family of the chairman, CEO and founder Olivier de Puymorin. Specialised in remote collaboration services for businesses (audio and web conferences), the group, which has 500 employees in Europe, Asia and North America, recorded 70 million euros in revenues, with a “good level of profitability”, and is ranked number three worldwide among suppliers of personalised remote collaboration solutions. UFG PE : Arnaud Filhol, Alexandre Delby Wilkes - Apax Partners : Eddie Misrahi ; CDC Innovation : Franck Noiret. ADVISERS IN | L: Bird & Bird (M. Baffreau, C. Basdevant-Soulié) , A: Grant Thornton (S. Quagliaroli) D: Neuflize OBC (P. de Valerio) - Bred (E. Fondecave) - Crédit Coopératif (C. Giraud) Banque Commerciale du Marché Nord-Europe (E. Talbot) ADVISERS OUT | L: Gatienne Brault (G. Brault) - Chammas & Marcheteau (L. Chammas, M. Picciolini)

OBO

IN: UNIGRAINS, CÉRÉA MEZZANINE, JÉRÔME DUPREZ OUT: FOUNDERS SECTOR: AGRIBUSINESS AND INDUSTRIAL GOODS REV: 215 M¤

CHEMINÉES BRISACH (FRANCE)

OBO

IN: EVOLEM (34%) OUT: FOUNDERS SECTOR: MANUFACTURING REV: 35 M¤

UNIGRAINS AND CÉRÉA MEZZANINE HAVE CARRIED OUT AN OBO on Moret Industries. The manager Jérôme Duprez is further strengthening his stake in the industrial group, while the family shareholders, who have been present for five generations, are reducing their interest. The capital increase, representing around 30 million euros, is being financed for two thirds by senior debt (contributed by the group's five banks) and one third by a contribution of capital and bonds with equity warrants from Unigrains and Céréa Mezzanine. Created in the second half of the 19th century in the Aisne Region, Moret Industries has two branches: on the one hand, the design, manufacturing and distribution of industrial pumps, under the Ensival Moret brand, and on the other, the design and production of “turnkey” equipment and facilities under the Maguin brand for agrifood markets (sugar, alcohol, drying and environment), such as ethanol units. These two business lines, which represent virtually equivalent amounts, enabled it to record 215 million euros in revenues over 2008, up 10%. The strategy aims to consolidate the company's positions on its main markets (France, Belgium, North Africa, Middle East, etc.) and develop its key areas of expertise, through both external and organic growth. Unigrains: Dominique Courcoul, Daniel-Eric Marchand, François-Xavier Masson. Céréa Mezzanine: Pierre Geerolf, Catherine Réquier.

EVOLEM HAS FINANCED A BIMBO DEAL ON CHEMINÉES BRISACH. With one of the two partners withdrawing from the company's capital, the Lyon-based fund acquired a 34% stake, injecting 2.5 million euros. The chairman and CEO Thierry Rousseau raised his interest to 56% of the capital, while Eric Jacquelin, who previously worked as a logistics consultant with the company, invested 0.6 million euros to acquire a 10% share. The deal structure is rounded off with a 3 million euro senior debt. Founded in 1961 by René Brisach, the company is one of the pioneers in France for the production of fire-places, chimneys, stoves and hearths. Based in Sainte-Maxime, in the Var Region, Cheminées Brisach employs 175 people, generating 35 million euros in revenues over 2008, up 10% compared with 2007. The brand has 135 exclusive dealers in France. The range is continuing to be overhauled, notably with the recent launch of ethanol-based ambiance fireplaces, which should enable the company to maintain its rate of growth. Evolem is also looking to accompany it with the implementation of its development plan on neighbouring European markets. Evolem: Franck Urbanski, Sandrine Escaleira.

ADVISERS IN | L: Orsay (F. Milotic, V. Dixneuf), A: Abelia Consulting (D. Parquet) | ADVISERS OUT | M&A: Aucteor Finance (D. Tréchot, L. Jamet, P. Garnier), L: Doxa (B. Lemistre), EFC (O. Davigny)

ADVISERS IN | M&A: Cap Office (F. Goenaga) - L: Alcya Conseil (L. Simon, Valérie Ciancia) D: BNP Paribas -Banque Palatine - Caisse d'Epargne ADVISERS OUT | L: Bignon Lebray (G. Bazaille) - Verniaud Rolland -

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PRIVATE EQUITY MAGAZINE | August 2009 | Special Issue |

LBO

IN: CÉRÉA GESTION, BANEXI CAPITAL PARTENAIRES, GRAND SUD-OUEST CAPITAL OUT: PREMIER FOODS SECTOR: FOOD INDUSTRY TV: 50 M¤ | D : 30 M¤

ERCOM (FRANCE)

IN: ALVEN CAPITAL, OTC AM, A PLUS FINANCE, CAPZANINE OUT: SHAREHOLDERS SECTOR: TELECOMS TV: 12 M¤

REV: 8,4 M¤

REV: 110 M¤

CÉRÉA CAPITAL AND BANEXI CP HAVE BOUGHT OUT MARTINE SPÉCIALITÉS for 50 million euros from the UK agrifood group Premier Foods (LSE). The two funds have each taken 43% of the capital, with the balance held by Didier Boudy and its management team. The debt, structured around a club deal with five lenders and three mezzanine lenders , represents more than 30 million euros, with two thirds senior, including a 7 million euro capex line, and one third mezzanine. In May 2008, the British group had launched the sale of Sofrapain, including Martine Spécialités, its pastries subsidiary. After exclusive talks were called off with an industrial player in September, Premier Foods accepted the joint bid by the industrial firm Nutrixo and Céréa Capital to respectively buy out Sofrapain for its Viennese pastry activities and Martine Spécialités under a spinoff. In 2008, the target recorded 74 million euros in revenues, and it employs 390 people at its production site in the Dordogne Region. The capex put in place should make it possible to finance its expansion. Martine produces nearly 30,000 tons of products, with 650 references, which it supplies to the mass retail sector as well as restaurant and catering networks. Céréa Gestion: Gilles Sicard, Antoine Peyronnet, Xavier Renault - Banexi CP: Michel Rowan, Pierre Jourdain - Grand Sud-Ouest Capital: François de Vaugelas. ADVISERS IN | M&A: Close Brothers (P. Guézenec), L: Ayache Salama (O. Tordjman), Dumon Avocats (J-B. Dumon), A: PricewaterhouseCoopers TS (M. Naquet Radiquet), Wagram (P. Le Clerc), Bignon Lebray (F. Dedieu), E: Capstan (J-M. Mir), AS: Diligence Partners (D. Mathez), Marsh (J-M. Dargagnaratz), ERM (J. Famy), D: BNP Paribas (M. Beque), LCL (E. David), Crédit Agricole Charente (T. Vayssier), Natixis (F. Alliany) M: Céréa Mezzanine (P. Geerolf), Unigrains (J. Geney), CIC Mezzanine (F. Petit) ADVISERS OUT | M&A: Stamford Partners

TELE-ANIMAUX (FRANCE)

DEV

ADVISERS IN | L: CVML (A.Dethomas, F. Brocard), A: Ernst & Young TS (E. Picard, F. Poncet, Al. Lacour) E: Devoteam (B. Hakim, M.Toukourou, M.Bouzoubaa, S. Lefebvre) ADVISERS OUT | M&A: Clipperton Finance (N. von Bulow), L: Denton Wilde Sapte (P. Jouglard, K. Violeau)

DAHER (FRANCE)

DEV

INV: FSI (17%), ACE MANAGEMENT (3%) OUT: FOUNDERS SECTOR: AERONAUTIC TV: 80 M¤

OBO

IN: BNP PARIBAS DÉVELOPPEMENT OUT: FOUNDERS SECTOR: MEDIAS TV: > 4,5 M¤ | SD: 2,7 M¤

ALVEN CAPITAL, OTC AM, A PLUS FINANCE AND CAPZANINE, the historical investor, are taking part in a 12 million euro fundraising carried out by Ercom. Founded in 1986 by Jean Lacroix in Vélizy, the target had been taken over through an MBO in 2007 by its management and Capzanine. It is specialised in producing solutions to test the security and quality of telecoms networks, particularly for the development of 4G networks, which provide very high-speed data access. With more than 20 patents to date, the SME headed by Didier Pagnoux employs around 45 specialised engineers. Its technological expertise has enabled it to develop privileged relationships with the French State and with leading groups on the telecoms market. Following its takeover, its revenues increased by 65% in 2008 to reach 8.4 million euros. More specifically, this further significant capital increase will enable Ercom to finance strategic acquisitions and develop its business internationally, particularly in Japan and the US for support. Alven Capital: Nicolas Celier, Jeremy Uzan - A Plus Finance: Jean Michel Pimont, Pierre Loup - OTC AM: Xavier Faure, Laurent Foiry - Capzanine: David Hoppenot, Maxence Radix.

REV: 6 M¤

BNP DÉVELOPPEMENT IS INVESTING 2.5 MILLION € in the capital of the Télé-Animaux group, which has at the same time successfully raised 2.7 million euros of senior debt arranged by Crédit Lyonnais. Created in 2005 by Bernardo Gallitelli, who remains its majority shareholder (52%), the media group (formerly Buena Media) is the French market leader in the pet world. The company has developed its business through external growth and today has five magazines, including 30 Millions d’Amis, a weekly veterinary magazine (L’Essentiel), a trade press title (Petmarket) and an animal pharmaceutical newspaper (Pharm Animal), in addition to 10 themed sites. The funds raised will be used to accelerate external growth for the group, which today has 6 million euros in revenues for an EBIT of 7%, taking over Girault, a manufacturer of grooming supplies and accessories. BNP DÉV.: Jean Charles Moulin, Valérie Bouilhet-Ferri.

REV: 930 M¤

ACE MANAGEMENT IS JOINING FORCES with the new strategic investment fund (FSI) to raise their respective stakes in Daher, the aeronautical equipment manufacturer, to 3 and 17%. The acquisition of this interest is based on an 80 million euro capital increase, with the majority subscribed for by the two structures. ACE Management is intervening through its dedicated venture capital funds Aerofund I and II for the aeronautical sector, sponsored by CDC Entreprises, EADS and Safran. Announced back in November, this represents the second strategic investment by the FSI following the deal finalised in February on the automotive equipment manufacturer Valeo. This strengthening of its capital has enabled Daher to wrap up the 585 million euro financing plan announced for the next five years, in the aeronautical and nuclear sectors according to the FSI, which aims to actively participate in governance bodies. The company employs 7,000 people in 12 countries, and is forecasting 930 million euros in revenues for 2009. ACE Management:Thierry Letailleur, Xavier Hermann, Delphine Dinard. ADVISERS IN | ADVISERS OUT |

ADVISERS IN | D: LCL (V. Tornamorell) - Crédit Agricole (L.Dumay, E. Dubray) ADVISERS OUT | M&A: Aelios Finance (P. Vignaud, H. Mollard), L: Cohen Amir-Aslani, Marseillan Ornano & Associés (K. Fitau, B. Arragon, E. Cini)

24H00 (FRANCE) SEMELEC (FRANCE)

BUILD-UP

IN: BARCLAYS PE, MARTEK POWER OUT: MANAGERS SECTOR: OTHER ELECTRONICS, EQUIP. INDUSTRIAL REV: 2 M¤

VENTURE

IN: AGF PRIVATE EQUITY, SEVENTURE OUT: FOUNDERS SECTOR: INTERNET TV: 6,5 M¤

REV: 6 M¤

MARTEK POWER, 62%-OWNED BY BARCLAYS PE since January 2008, has finalised the acquisition of Semelec from its manager. This build-up, the second following the group’s LBO, has been fully financed through equity. Created in 1972, the target is expected to generate 2 million euros in revenues thanks to around 20 employees. Semelec has specialised in metrology (metrics models), calibration and maintenance for measuring equipment. This acquisition is enabling Martek Power to add a complementary business to that of its subsidiary Sefelec (9 million euros in revenues), recognised and established on the European market for electrical safety and cable testing. The group, whose manager Marcel Katz has kept 38% of the capital alongside Barclays PE, is consolidating its position on aeronautics, defence, telecoms or medical energy conversion (68 million euros in revenues in 2007, 930 employees across France, England, US, Mexico, Tunisia and China).

24H00.FR HAS COLLECTED 6.5 MILLION EUROS for its second round of fundraising with its historical VC AGF Private Equity (3 million euros), joined by Seventure (3 million euros) and various business angels (500,000 euros). The women’s online shopping site had already raised 6 million euros at the start of 2007 (including 5 from AGF PE). In 2006, its founder, Patrick Robin, a net pioneer who created the internet service provider Imaginet then sold it on to the Colt Group in 1998, has become a minority shareholder following this round of fundraising. Created on a model for events sales, 24h00.fr has since the end of 2007 become an intermediation site for leading women’s chains and brands on the web. This differentiating model enabled it to generate nearly 7 million euros in revenues over 2008, up 50% compared with 2007, and to break even during the fourth quarter of last year. AGF Private Equity: Benoît Grossmann, Seventure: Anne Costaseque, Valérie Gombart.

ADVISERS IN | L: Taylor Wessing (G. Amsallem, L. Lapeyre) A: Bellot Mullenbach ADVISERS OUT | M&A: Acetis (F. Bos)

ADVISERS IN | L: Jones Day (R. Bonnet, C. Gavoty), A: Fischbach (M. Fischbach) ADVISERS OUT | M&A: Aelios Finance (P. Mercier), L: Valluet Achache (N. Valluet)

| Special Issue | August 2009 | PRIVATE EQUITY MAGAZINE

39

FIND ALL THE DEALS ON WWW.PEMAGAZINE.FR/DEALS

MARTINE SPÉCIALITÉS (FRANCE)

SPINEGUARD (FRANCE)

COREVALVE (FRANCE)

VENTURE/SPIN-OFF

FIND ALL THE DEALS ON WWW.PEMAGAZINE.FR/DEALS

IN: CRÉDIT AGRICOLE PE, INNOVEN PARTENAIRES, A PLUS FINANCE OUT: SPINEVISION (100%) SECTOR: MEDICAL PRODUCTS TV: 8,2 M¤ CAPE, INNOVEN PARTENAIRES AND A PLUS FINANCE have contributed 8.2 million euros to SpineGuard. The funds raised have enabled the new company to acquire Pediguard, a vertebral drilling instrument, from SpineVision, the manufacturer of medical equipment for spinal implants. Following this fundraising, the three funds own equal stakes giving them a majority in the new company SpineGuard, alongside Pierre Jérôme and Stéphane Bette, former executives from Medtronic Sofamor-Danek and two of SpineVision’s cofounders. Use of Pediguard, which makes it possible to optimise the placement of pedicle screws during spinal operations requiring vertebral drilling, is developing strongly in the US (two thirds of sales). Indeed, it considerably reduces the risk of screws being positioned incorrectly, which could result in quadriplegias, while making it possible to avoid any use of radiology materials, which are dangerous for staff due to radiation exposure. SpineGuard, which will employ 15 people in Paris and San Francisco, aims to equip surgery departments, which carried out close to one million vertebral drilling operations in 2008, with the PediGuard, billed at 1,500 dollars. SpineVision, which is still supported by the Sofinnova Partners, Innoven Partenaires, Healthcap and Bioam funds, will continue developing and marketing other spinal surgery instruments. Cape: Alexia Pérouse - Innoven Partners: Thomas Balland - A Plus Finance: Jean-Michel Pimont.

EXIT/LBO2

INV: MEDTRONIC (100%) OUT: SOFINNOVA PARTNERS, APAX PARTNERS, HEALTHCAP, MAVERICK CAPITAL, FOUNDERS, MANAGERS SECTOR: MEDICAL DEVICE TV: 550 M¤ | MULTIPLE: > 10

THE AMERICAN MEDICAL INSTRUMENTATION SPECIALIST MEDTRONIC has taken over Corevalve for an initial amount of 700 million dollars (546 million euros). A “historical” exit for the main shareholder Sofinnova Partners, which had come on board in 2003, and for Apax Partners, Healthcap and Maverick Capital, which joined it in 2005 and 2007. When the VCs were gearing up to reinvest in the Irvine-based company (California), Medtronic offered them 700 million dollars, which will be followed by additional payments depending on whether or not the objectives defined beforehand are achieved, ensuring “one of the biggest capital gains in its history” for Sofinnova. Corevalve, founded in 2001 by the surgery professor Jacques Séguin, has developed a technology that is less traumatising than open heart surgery for patients with aortic valve stenosis. Successfully launched in Europe, and waiting for its release on the US market to be authorised, planned for 2011, the product uses the smallest catheter on the market. Sofinnova Partners: Antoine Papernik. ADVISERS IN | ADVISERS OUT | M&A: Goldman Sachs (L. Sarsfield) - J: Wilson Soncini (M. Waters)

ADVISERS IN | L: Dechert (E. Trombe, A. Paronneau) - A: Grant Thornton (M. Claverie, S. Dervain) ADVISERS OUT | M&A: Aelios Finance (A. Lostis), L: Fried Frank (F. Hellot, AC Rivière) - Redlink (H. de Kervasdoué, V. Tazé), A: Plasseraud (E. Burbaud)

GROUPE LUCIEN BARRIÈRE (FRANCE) DBV TECHNOLOGIES (FRANCE)

EXIT/LBO2

IN: ACCOR OUT: COLONY CAPITAL (15%) SECTOR: LEISURE TV: 152 M¤

VENTURE

IN: SOFINNOVA PARTNERS OUT: FOUNDERS SECTOR: BIOTECHS TV: 6 M¤ SOFINNOVA PARTNERS IS REINVESTING 4 MILLION EUROS on the new 6 million euro round of fundraising carried out by the biopharmaceuticals company DBV Technologies. The company had raised 12.6 million euros in 2006 in its first round with Sofinnova (7 million euros), Apax Partners (5 million euros) and its long-standing investors (0.6 million euros). Founded in Paris in 2002 by two paediatricians, who continue to hold a majority stake, DBV Technologies has developed a globally patented E-patch (needleless) technology for diagnosing milk allergies without the risks linked to invasive methods. Looking to establish partnerships with major pharmaceutical companies, the biopharma is today welcoming ALK-Abello (250 million euros in revenues), the global desensitisation and immunotherapy market leader, into its capital. In this way, the Danish group is ploughing in 2 million euros alongside Sofinnova. These funds will enable the target, headed since 2005 by Jean-François Biry, to finance clinical trials of a treatment for peanut allergies. Sofinnova Partners: Rafaèle Tordjman.

REV: 1200 M¤

COLONY CAPITAL IS SELLING ITS 15% BLOCK IN THE LUCIEN BARRIÈRE GROUP for 153 million euros to Accor, which already had a 34% stake. This exit is being carried out in line with the initial agreement entered into in January 2004 between Accor, Colony and the Barrière family, allowing the financial shareholder to sell its shares to the industrial shareholder. In November last year, Colony Capital had officially announced its intention to exercise its option. At the time, five banks were called on to value the fund's interest in the capital of the casino market leader, which had sales of 1.2 billion in 2008. Following this operation, Accor owns 49% of the group's capital, with the balance remaining within the family. The sale could also have an impact on Colony’s interest alongside Eurazeo in the Accor Group’s capital. In February 2009, the two funds announced that they held more than 25% of the shares. ADVISERS IN & OUT | M&A: Société Générale (H. Motel)

ADVISERS OUT | L: Morgan Lewis (K. Noël)

LEYTON & ASSOCIÉS (FRANCE)

MYFAB.COM (FRANCE)

IN: PRAGMA CAPITAL, GIMV OUT: IXEN (NPE) (55%), CAPZANINE SECTOR: FINANCIAL SERVICES, BUSINESS SERVICES TV: 130 M¤ | SD: 40 M¤ | M: 15 M¤

VENTURE

IN: BV CAPITAL, ALVEN CAPITAL OUT: FOUNDERS SECTOR: INTERNET TV: 5 M¤

REV: > 10 M¤

MYFAB.COM, THE LEADING SITE FOR THE PRODUCTION OF DESIGNER furniture and items on request, is carrying out its second round of fundraising for 5 million euros with the German VC BV Capital (3 million euros) and Alven Capital, which had already supported the company during its start-up phase by providing it with 200,000 euros at the beginning of 2008. Created by Stéphane Setbon, along with three other cofounders in 2008, this Paris-based start-up has a concept that combines group purchasing and production on request, with a catalogue of over 600 products (mainly interior design). It employs 80 people, split between offices in Paris, Shanghai, Hong-Kong and Hamburg, and expects to generate nearly 10 million euros in revenues over 2009. This round of fundraising will make it possible to finance the company’s international development, and more specifically its entry onto the German market, scheduled to take place in a few weeks time, as well as to open up the platform to other markets such as clothing. BV Capital: Stéphane Monmousseau, Denis Catz, Alexis Wibaux, Gimv: Arnaud Leclercq, Sandra Pezet. ADVISERS IN | L: Nixon Peabody (E. Porte, D. Glucroft) ADVISERS OUT | L: Lefèvre Pelletier (D. Pubellier, P. Lévêque, A. Aubery)

40

PRIVATE EQUITY MAGAZINE | August 2009 | Special Issue |

EXIT/LBO2

REV: 50 M¤

PRAGMA CAPITAL AND GIMV HAVE SIGNED A SECONDARY LBO on one of the French market leaders, Leyton & Associés. iXEN, which had acquired a 55% stake in the consultancy valued at 40 million euros in October 2006, has sold off its interest following an over-the-counter deal for nearly 130 million euros. Capzanine, which held a small stake, has also exited. Pragma Capital, which has been working on the takeover project since October 2008, is taking up an equity ticket in the top of its usual investment bracket, ranging from 10 to 35 million euros, giving it 36% of the capital, compared with 9% for GIMV. Founded in 1997, Leyton & Associés has developed its consulting business on payroll tax optimisation before diversifying into tax aspects, non-strategic procurement and innovation financing in France and internationally. With more than 300 employees, the group posted 41 million euros in revenues for 2007, and is forecasting 50 million euros in June 2009. Pragma Capital: Stéphane Monmousseau, Denis Catz, Alexis Wibaux - Gimv: Arnaud Leclercq ADVISERS IN | M&A: Mandel Partners (B. Le Galcher Baron, F. Perez) - L: Weil Gotshal & Manges (F. Cazals, Y. Olivier, Cassandre Porgès, E. Ringeval) - A: Deloitte (H. Krissi, P. Abenso) - E: LEK (Rémi Haussmann, David Danon-Boileau) - D: Banque Espirito Santo (T. Boistay) - CIC (V. Rivaillon) - LCL (Hélène de Prévoisin) Société Générale (Nathalie Bleunven) - M: TIM Mezzanine (P. Bruneau, B. Fougerat) - Banque Espirito Santo (T. Boistay) - LD: Bird & Bird (H. Pillard) - SJ Berwin (C. Millar) ADVISERS OUT | L: SJ Berwin (C. Digoy, Lea Ribeiro) - A: Constantin (Cécile Rémy, R. Montloup) T: Room (F. Vignalou) - E: Paul Hastings (L. Roglev, Hortense Rouvier)

COMPIN (FRANCE)

EXIT/LBO2

IN: LBO FRANCE, MANAGERS, PERFECTIS PE, ALLIANCE ENTREPRENDRE, PALUEL-MARMONT CAPITAL OUT: PERFECTIS PE SECTOR: CHEMICAL MATERIALS REV: 400 M¤ LBO FRANCE IS BUYING OUT SAM+ FROM PERFECTIS PRIVATE EQUITY, which is also reinvesting on a minority basis in order to continue supporting the managers who are still involved in the operation. The funds managed by Alliance Entreprendre and Paluel-Marmont Capital, which have been partnering the group since 2003, are also reinvesting on this deal, financed with a slight leverage effect thanks to CIC and BNP Paribas. In 2006, the selling fund had carried out a secondary MBO on SAM+, the company specialised in producing integrated metal structures for the building sector, joining forces with the manager at the time, Bernard Delorme. The latter is standing down from the executive in favour of Michel Lucas, while remaining on as a shareholder. In the three years during which Perfectis has been involved, SAM+ has grown from 30 to 40 million euros in revenues and virtually doubled its profitability. Perfectis has accompanied the management team in terms of both its external growth policy (two acquisitions in 2006-2007) and by supporting the maintenance activity. LBO France: Jean-Marie Leroy, Perfectis PE: Stéphane Bergez, Gabriel Fossorier, Alliance Entreprendre: Bernard Pénicaux, Paluel-Marmont Capital: Xavier Poppe. ADVISERS IN | L: Frieh & Associés (L. Masseran, D. Boulanger), A: Conseil Audit & Synthèse (C. Piémont, J-F. Nadaud), T: Arsène, E: Estin & Co, D: CIC (J. Salmon, M. Lecomte), BNP Paribas (M. Siciliano) ADVISERS OUT | M&A: Close Brothers (A. Matheron, T. Marie), L: HPML (V. Libaud) Cabinet Martin (M-D. Martin)

EXIT/LBO2

INV: BARCLAYS PE ( > 70%) OUT: LBO FRANCE SECTOR: INDUSTRIAL GOODS TV: 95 M¤

BARCLAYS PE IS ACQUIRING MORE THAN 70% of the Compin Group from LBO France. The target is valued at 95 million euros, representing 7.5 times the level of EBITDA expected for this year. The selling fund had bought this manufacturer of seats for public rail transport in 2005. Since then, Compin has developed its scope through build-ups, including the acquisition of a former subsidiary of Bombardier in 2006 and a majority stake acquired in a joint venture in China. The group, which is now structured around three business lines that dovetail effectively with one another (seats, interiors and front-ends), is forecasting 150 million euros in revenues for the current year, with an order book of 300 million euros. Driven by this development, LBO France has taken nearly four times its initial investment and is remaining on board as a minority shareholder (8%). Barclays PE is financing the acquisition thanks to senior and mezzanine debt of just less than the equity invested, which is expected to represent nearly four times EBITDA. The manager Marc Granger, is also reinvesting with its management team, moving up to a capital stake of nearly 20%. LBO France: Pierre Galix. CONSEILS ACQUÉREURS | M&A: Baycap (C. Prévot), L: SJ Berwin (M. Bloch), A: PwC TS (F. Antarieu) AS: Roland Berger (O. de Panafieu), D: BNP Paribas (I. Guillaumet), SG (N. Bleunven), LCL (A. Patarini), Banque Palatine, BESV, M: Mezzanis (M. Benchimol), JD: Gide Loyrette Nouel (E.Cartier) ADVISERS OUT | M&A: Close Brothers (P. Croppi) Transaction R (P. Carpinelli), L: Lefèvre Pelletier (J-L. Bedos), A: Conseil Audit & Synthèse (J-F. Nadaud) LEK (A. Bernardin)

GEMALTO (FRANCE) NUTRITION & SANTÉ (FRANCE)

IN: FSI (8%) OUT: TPG CAPITAL (6,5%)

OUT: ABENEX CAPITAL (EX-ABN AMRO CAPITAL FRANCE), L CAPITAL SECTOR: FOOD INDUSTRY REV: 287 M¤ ABÉNEX CAPITAL AND L CAPITAL HAVE JUST SIGNED AN AGREEMENT with the Japanese group Otsuka Pharmaceutical to take over Nutrition & Santé. The amount of the sale is confidential and the funds are not releasing their IRR or their multiple, which are likely to be high on account of the target’s strategic interest for the Japanese industrial player. The European dietary food market leader had been taken over with an LBO in February 2006 by Abénex Capital and L Capital from the pharmaceutical group Novartis. The funds took control of 85% of the capital, with the remainder held by management. Over the past three years, Nutrition & Santé has accelerated its development, led by Didier Suberbielle (co-founder of Parashop, former chairman of CondeNast France and Champagnes Pommery). Revenues increased by 17% to reach 287 million euros in 2008 and the company has carried out three external growth operations: Binaman in Spain, Cerealpes in France and Orzo Bimbo in Italy. Based in Revel, the company employs 950 people throughout Europe. ADVISERS IN | M&A: Lazard (Alexandra Soto, M. Bucaille, A. Benais, J-P Bescond) - L: CMS Bureau Francis Lefebvre (J. Isnard, E. Milhac, N. Callies, O. Benoit) - A: Deloitte (M. Jiggins, A. Sillero, P. Notargiacomo) ADVISERS OUT | M&A: Wagram CF (P. Le Clerc, B. Bolleau) - L: Frieh & Associés (M. Frieh,

SECTOR: ELECTRONIC TV: 160 M¤

REV: 1680 M¤

THE STRATEGIC INVESTMENT FUND (FSI) has sealed its biggest investment, ploughing 160 million euros into acquiring an 8% stake in Gemalto from the investment fund TPG Capital. The latter is reducing its interest in the smartcard manufacturer to 6.5%, compared with 14.5% previously. In becoming one of the company’s main shareholders, the FSI has requested a seat on the company’s board of directors. Created through the merger between Axalto and Gemplus in 2006, Gemalto published a 5.4 % drop in revenues for the first quarter of 2009, down to 367 million euros, while confirming that it still expects its sales to grow over the full year. In 2008, it generated 1.68 billion euros in revenues, with 153 million euros in net income. ADVISERS IN | L: Freshfields (F. Cohen, D. Barat ) ADVISERS OUT | L: Cleary Gottlieb (S. de Beer )

EUROGERM (FRANCE)

EXIT/LBO2

IN: CATHAY CAPITAL (12,7%) OUT: SIPAREX (12,7%) SECTOR: AGRIBUSINESS TV: 6 M¤

D. Boulanger)

IN: JEAN-PHILIPPE GAY OUT: MBO PARTENAIRES (60%) SECTOR: TRANSPORT TV: 10-15 M¤

EXIT/LBO2

EXIT/LBO2

IN: OTSUKA PHARMACEUTICAL

TRANSPORT MURIE (FRANCE)

REV: 114 M¤

EXIT/LBO2

REV: 11 M¤

MBO PARTENAIRES HAS SOLD OFF ITS 60% STAKE in the explosive materials logistics firm Transports Murie to an individual “who knows the industry well” (Jean-Philippe Gay). This exit has enabled MBO Partenaires to record an IRR of 60% at the end of its three years presence in the capital, during which the family-owned SME carried out a build-up on its main rival Galopin in 2006. Which has consolidated its leading position on the French market and driven it above the 10 million euro mark for revenues. In 2008, revenues came in close to 11 million euros, with operational profitability of nearly 20%. Following the operation, the two owner managers, who have held operational positions within the group for more than 20 years, Joël and Thierry Murie, kept a minority interest in the new structure. MBO Partenaires: Jean-Michel Rallet. ADVISERS IN | M&A: Valactif (P. Zoppi, J-N Combasson) - L: CMS Bureau Francis Lefebvre (C-Y Rivière, J. Queyroux) - A: Exafi (C. Guyetant) - E: Fromont Briens (Y.Fromont) ADVISERS OUT | M&A: Aforge Finance (A. Roué-Lécuyer, C. Caunésil) - L: Quadratur (G. Fresel, L. Velut)

REV: 43 M¤

SIPAREX IS SELLING ITS 12.7% STAKE IN MOBAGO, the main shareholder in Eurogerm with 67.1%, to the Franco-Chinese fund Cathay Capital for an amount “close to the average share price for the company” valued at nearly 48 million euros on Alternext. Siparex had entered the capital of the producer of cereal ingredients for the milling and bread making industry in 2004 by investing 4.4 million euros alongside Carvest (1.4 million euros), which is still a shareholder in Mobago, with 2%. The Lyonbased financier has an “IRR of around 20%”, primarily achieved thanks to its partial exit in 2007 when Eurogerm floated on Alternext, which valued the SME from Dijon at 72 million euros. Following this capital restructuring, ACG, the holding company of the chairman and founder Jean-Philippe Girard, has maintained its majority interest, with 84.2% of Mobago. After successfully setting up in Africa and South America, this deal confirms Eurogerm’s desire to expand in a new region: Asia. Hence the choice of Cathay Capital Private Equity, which is intended to accompany it and firm up opportunities on this continent, particularly in China, where the food product segment relating to the Wheat-Flour-Bread sector is seeing strong and structural growth, driven by changes in consumption patterns and dietary habits. With 10 million euros in free cash flow, and a borrowing capacity of 2 for 1, Eurogerm (2008 revenues: 43 million euros) is armed with some 30 million euros to finance its international development. CATHAY CAPITAL: Edouard Moinet. ADVISERS IN | L: Taj (A. Larcena) ADVISERS OUT |

| Special Issue | August 2009 | PRIVATE EQUITY MAGAZINE

41

FIND ALL THE DEALS ON WWW.PEMAGAZINE.FR/DEALS

SAM+ (FRANCE)

A

BUSINESS RESTAURANTS f TO CLINCH A DEAL

f TO GET ACQUAINTED

Oth Sombath

Bar Ladurée

There seems to be some sort of misunderstanding about Thai cuisine in Paris. Most of the time, customers want it to be abrasive, singing your nostrils, mystically spicy. As if its only purpose was to fill, or indeed, burn a hole. The Thailand of Oth Sombath is quite another story. An air of exoticism with a truly Parisian style. For its return to the capital, after an interlude down in St Tropez, Sombath is moving up in society, with an elegant double floor designed by Alain Ducasse’s favourite interior designer Patrick Jouin. In the end, a table that is mid-chic, mid-lemongrass, where herbs and spices caress and blend tastes and textures (outstanding beef, yellow curry prawns, spring rolls with red wine and banana sauce, water chestnut flan). Silky, piercing, sometimes bordering on snobby, an address somewhere between Siam and sex appeal. OTH SOMBATH. 184, rue du Faubourg-Saint-Honoré, Paris 8th. Tel: 01.42.56.55.55. Closed Saturday and Sunday. Menus: 28 and 35 euros (lunch), 70 euros (dinner). A la carte: around 45-65 euros. A carafe? JP Brun Beaujolais 2006 (38 euros). A table? Number 14 on the top floor, the favourite of Eddy Mitchell (a partner in the business). Parking: valet service.

BAR LADURÉE. 13, rue Lincoln, Paris 8th. Tel. 01 40 75 08 75. Every day until midnight. A la carte: around 40-60 euros. A dish? Cod egg and rose petal blini. A drink? Small but smart selection, including a dry white Sancerre Terre de Maimbray, Domaine Reverdy (10 euros). A table: As stool. Parking: Pierre-Charron.

f WITH COLLEAGUES

DR

La Bigarrade

RESTAURANTS A selection of the latest reviews of our favorite business tables. By Emmanuel Rubin

f TO NEGOTIATE

Antoine

ANTOINE. 10, avenue de New York, Paris 16th. Tel: 01.40.70.19.28. Every day. A la carte: around 60-100 euros. Menu: 48 euros. Cellar: beautiful surroundings, but tasty bill. Lounge available for private hire (10 to 12 people). Valet service. PRIVATE EQUITY MAGAZINE | August 2009 | Special issue |

DR

DR

In the place of Port Alma, an old bouillabaisse nautilus, shipwrecked without too much regret, a beautiful socialite aquarium catching the wave, crafting a cuisine that will make you froth at the mouth, ideal for serving up first-class fish in their simplest ways: sea bream tartar combining an exotic touch with a virgin combava sauce, red mullet whitebait with crispy iodine, a fine serving of sole as silky as its accompanying puree of kipfler potatoes, line-caught bar grilled over fennel wood…A deliciously chic maritime table, with the fine sea salt on the back of the cod and, for once, capable of conjuring up truly original desserts like the heady yuzu lemon soufflé. Seen from the room’s bay window (ask for table number 10), the Eiffel Tower itself seems to get on board in its own way, like an unexpected lighthouse in the heart of the city.

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With Ladurée, the tea room, we already knew about its hot chocolate on Japanese lips and macaroons eaten on Vuitton heels, with the whole world lifting their little finger with a savoury-sweet tea. More recently, the address has gone over to the bar side, with an extremely designer bar where the district’s overactive people put down their elbows for a chat with their mouths full of these deliciously high-society delicacies, blending glamour with a more down to earth touch. Let's call it in the in-the-know appetite: Noirmoutier potatoes stuffed with caviar or salmon eggs, high-quality selections served raw with ginger (beef, lobster, scallops, etc.), ever varied alternatives of scrambled eggs, tempting sweets in small glasses. A table midway between strategy and snobbery.

After its slightly over-the-top beginnings, this chic kitchenette, launched in 2009, has not taken long to rein in its ego and set the spotlight firmly on the stove of a brand spanking new young chef, formerly of the Royal Monceau. Gone are the overly precious behaviour and boastful service, giving way to an ambience of complicity, bringing the feeling to life with, in the twilight of appetites, a truly outstanding and unique menu orchestrated like a travelling gourmand: line-caught bass, “pouce-pied” goose barnacles with spring leeks in vinegary stock, rosé crispy pigeon thickened with blood…five dishes, five emotions, the pleasure of this gradual and sudden slide, this feeling that rarely, this season, cooking has been so knowledgeably open. In the restaurant as well as on the plate. LA BIGARRADE. 106, rue Nollet, Paris 17th. Tel. 01 42 26 01 02. Every day except Saturday lunchtime and Sunday. A la carte: around 50-60 euros. Menu: 35 and 45 euros (lunch), 65 euros (dinner). A dish? Raw scallops, green apple juice and lemon caviar, almond butter. A carafe? Organic Saumur-Champigny Clos Cristal 2006 (29 euros). A table? Number 3 (but be careful, there are only 20). Parking: Batignolles.

f SEDUCING THE MANAGEMENT

Yam Tcha A little revelation of a restaurant hidden away in the old Halles district. An unpretentious decor, half a room with 16 tables and a cupboardsized kitchen with a young female chef, who recently left the famous three-star Astrance (Paris 16th). What else? Unexpected but often surprising! No menu, waiting staff who reveal the menu’s secrets and dishes that keep on coming, without any other concern than the here and now, the talent, here and Asia, the intensity of the products and the science of the cooking. The result: a gastronomic experience all about refined taste, deliciously warmed by a rare tea sommelier: Mozambican prawn ravioli, foie gras on asparagus, szechuan aubergines and challans duck, olive oil cracker, milk ice cream, and more. YAM TCHA. 4, rue Sauval, Paris 1st. Tel: 01.40.26.08.06. Closed Monday and Tuesday. Menus: 30 euros (lunch), 45 euros (dinner) and 65 euros (discovery menu). A dish? Line-caught croaker, green Provence asparagus. A glass? Red tea. A table? The As. Parking: Les Halles.

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THE REFERENCE IN FRENCH MID CAP PRIVATE EQUITY A team of experienced professionals dedicated to French Mid Cap Buy-outs, Owner Buy-outs and Expansion Capital opportunities.

www.azuliscapital.fr

Latest investments BUY-OUT Frozen pastry Sales 2008: €73 M

EXPANSION Retail jewellery chain Sales 2008: €30 M

REPLACEMENT CAPITAL Bathroom & sanitary fittings Sales 2008: €50 M

OWNER BUY-OUT Hygiene and disinfectants products Sales 2008: €39 M

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