In the first half of 2016, French private equity firms invested EUR5.5 billion to support and accelerate company growth projects, according to data released by the Association Française des Investisseurs pour la Croissance (AFIC).
This figure is up 47 per cent relative to the first half of 2015 and is above the 2006-2008 annual average.
For the first time in a six-month period, AFIC members surpassed the threshold of 1,000 companies receiving investments (1,040 in H1 2016). The geographic allocation of these investments was largely stable, with more than 80 per cent (84 per cent this half) based in France.
Six out of 10 companies (61 per cent) benefited from reinvestments, which accounted for 45 per cent of the investments made. The AFIC says this result demonstrates the ability of private equity to support growth projects and reinject fresh capital.
Olivier Millet, AFIC chairman, says: “In looking at the first-half figures, French private equity activity should be very positive in 2016. Investment, exits and fundraising figures are all at their highest levels or breaking new records. Since AFIC’s goal is to double the size of the French private equity market over the medium term, we applaud the vigor of the overall sector, whose purpose is to help companies scale up in size. With half of the capital raised coming from abroad, French private equity is demonstrating its appeal among large, global institutional investors.”
Private equity firms finance a large number of start-ups and small and medium-sized businesses. During the first half of 2016 more than half of the companies (573) received investments of less than EUR1 million and 98 per cent of the companies received equity financing amounts of less than EUR50 million. The long-term trend shows that amount per investment exceeding EUR100 million are on the rise, while those below EUR50 million are falling. The intermediary tranche of investments between EUR50 million and EUR100 million remains stable.
Amounts in excess of EUR100 million grew from an average of 29 per cent between 2008 and 2012 to 36 per cent since 2013 (32 per cent in H1-2006), while amounts below EUR50 million fell from an average of 60 per cent between 2008 and 2012 to 53 per cent since 2013 and (54 per cent in H1-2016).
During the first half of 2016 two records were set: the number of exits (695) and the cost of divestments (EUR4.4 billion), with the long-term trend moving toward more exits in excess of EUR100 million.
Strategic buyers and private equity firms accounted for 64 per cent of nominal divestment amounts and 28 per cent of the number of companies sold.
In the first half of 2016, fundraising reached a substantial EUR6.2 billion. This amount will be invested in the economy by the 55 management companies raising these funds through 108 vehicles.
This figure includes a single EUR2.8 billion fundraising. The long-term trend shows that single fundraising amounts in excess of EUR200 million are growing. They rose from an average of 38 per cent in the period from 2008 to 2012 to around 60 per cent since 2013 (71 per cent in H1 2016).
Regarding the subscriber category, insurance companies and mutual insurers are the main players in France and abroad.
Almost half (49 per cent) of the capital raised came from foreign investors. Access to international investors remains proportionally higher above the EUR200 million threshold.
Thierry Dartus, partner, head of the transaction advisory services department at Grant Thornton, says: “The first half of 2016 confirmed the trend observed since 2014 on all the activity segments, with total fundraising of EUR6.2 billion, which includes a single large-scale transaction, and which is marked by the growing share of capital raised abroad. Meanwhile, investment and divestment volume remained substantial, making it possible to reach or even exceed the records set in 2007.
“Supported by abundant capital and attractive financing opportunities, the French private equity market once again confirmed its dynamism in the first half of 2016, as evidenced by the increase in amount per investment and in the number of transactions completed.
“The activity in the months ahead can rely on solid liquidity and financing fundamentals, which will enable the companies, backed by their financial partners, to continue to create value.”
