Paris-based Ardian, formerly known as AXA Private Equity, has closed its Expansion Fund III on €450 million, plus an additional €50 million for co-investments.
The fund, which had a €450 million hard-cap, attracted investors from Europe, North America and Asia. European pension funds and insurance companies make up the majority of the fund, with 80 percent of the capital coming from existing investors, according to a statement.
The fund started raising external capital in March 2013 and held a €80 million close in April 2013. In July 2012, Ardian had already secured capital for this vehicle from its former parent insurer AXA Group – which was part of the agreement in the lead up to the spin-out which completed last October, Dominique Gaillard, a managing partner and head of direct funds at the firm, told Private Equity International.
Fund III focuses on growth capital and buyout transactions through majority or minority investments in companies valued at up to €500 million in France, Italy and Germany. “Investors like the fact that in this small-cap segment the fund is investing in three countries. It is also very appealing to the managers of these companies because we can offer them a buy and build strategy in three countries. For companies of that size, that is a big help,” he said.
The firm managed to attract a number of new investors from the UK, Germany and also North America and Asia. Among the new investors were high net worth individuals and family offices. Ardian also attracted insurance companies – a fact that surprised Gaillard. “We thought that due to Solveny II regulations we would have less insurance companies in the fund, but because we demonstrated that the returns were there for the previous funds and the cash-in cash out curve was quite quick, we convinced a lot of them,” he said.
While fund terms remained broadly similar to Ardian’s Expansion Fund II, which raised €353 million in 2006, the hurdle rate was increased from six to eight percent.
Ardian has already deployed about a quarter of the vehicle across four investments. In March, the firm acquired a 49 percent stake in Micropross, a French software company which specialises in smart card technology. Last November, it backed The CLS Group, a French provider of environmental data collection and location services, and Synerlab, a pharmaceutical manufacturing firm.
Ardian started investing in growth capital transactions in 2002. The firm has invested €445 million in 33 companies, supporting growth strategies and international development.
The fundraising for the Expansion Fund III was easier than for Ardian’s LBO Fund V, which closed on its €2.4 billion hard-cap last October, Gaillard said. “We were raising LBO Fund V when the negotiations for the spin-off from AXA Group weren’t finished yet. For a lot of investors in LBO Fund V it was difficult to commit until [it was clear what the] new structure of the management company [would be]. That introduced a level of uncertainty which made it a bit more complicated.” During the fundraising of Expansion III these issues weren’t prevalent, he said.
Despite being quite active in the market, deal flow in France has been subdued in recent years, Gaillard told PEI in a recent interview. “We have been active, but I wouldn’t say that deal flow has been strong in France in the mid-cap segment.”
The general hesitation to sell is reflected in France’s 2013 deal volume numbers. There were 251 financial sponsor-related M&A deals in France last year, slightly less than the 266 deals signed in 2012, according to data provider Dealogic.
However, deal values nearly doubled compared to 2012, reaching 251 deals worth a combined €11.1 billion, up from the €5.8 billion total in 2012. And there are further signs that conditions in the French buyout market are improving. “France has not been easy over the past two years – but this is now changing because growth is coming back slightly,” Sonia Trocme-Le Page, co-founder and partner of Paris-based placement agent Global Private Equity, told PEI in a recent interview.
For a more in-depth look at the French buyout market, click here for our country report which is published in PEI’s April issue.