Exclusive: Activa exits Ergalis and ProNatura

The exits come as the French firm prepares to close its third buyout fund

 Paris-based mid-market firm Activa Capital has exited two portfolio companies, partner Michael Diehl told Private Equity International.

The sale of speciality HR recruitment company Ergalis to Groupe LFPI yesterday netted the firm a 2.6x return and an internal rate of return of more than 30 percent. Activa purchased Ergalis in September 2010 as a spin-out from Netherlands-based Randstad. It was the second investment for Activa Capital Fund II, a €320 million 2007-vintage.

During the firm's four-year ownership period, Ergalis made six follow-on acquisitions and increased sales by more than 2.5x, becoming the ninth-leading generalist recruitment agency in France. The company’s revenue on acquisition was €63 million, with €3 million of EBITDA. The revenue forecast for this year is €170 million, with an EBITDA of between €11 million and €12 million, Diehl said.

Ergalis is Activa’s first exit from Fund II, which closed to new investments in March 2014 and now holds nine portfolio companies.

This week Activa also signed off on the sale of organic fruit and vegetable distributor ProNatura, in which it invested in 2005. The sale of the business to Naxicap Partners, part of Natixis Private Equity, the buyout arm of French lender Natixis, is due to close in the coming weeks.

Over the life of the investment ProNatura’s sales have doubled, Diehl said, reaching €82 million in 2013.

The sale is the ninth exit from Activa’s first fund, a 2002-vintage €162 million vehicle. It is understood that the previous eight exits from Fund I have returned 2.5x invested capital with an internal rate of return of 32 percent.

Activa will be keen to return capital to investors as it continues to raise its third buyout fund. The vehicle, which held a first close on €200 million at the end of last year, came to market in June 2013 targeting €320 million. Diehl told PEI the fund is “on track” to close by the end of the year or in early 2015.

Diehl said the improvement in the economic environment in France – partially driven by new reforms and French Prime Minister Manuel Valls appointing former Rothschild banker Emmanuel Macron as economy minister – has helped to coax investors back to the region.

“France historically for the last few years has been a harder sell,” Diehl said. “It’s been a little bit out of favour from an investor point of view, and certainly seems now to be ticking over significantly more.”

Diehl said a surge in mergers and acquisitions – which have increased six-fold this year in France – along with big takeover bids from the likes of GE (which bid $17 billion for French rail and energy group Alstom’s energy business) and Fosun International (which offered €22 per share for Club Med) have been a “catalyst” to deal-doing.

“There’s a much richer activity level in France at the moment. The deal flow has picked up considerably this year from what was a very, very bad 2012 and 2013 for France,” Diehl said. “I think the biggest brake on deal flow in France was fiscal uncertainty, and that’s obviously better now; Hollande has actually reduced taxes quite a bit. And also in terms of economic outlook, [it] is certainly not fantastic but it’s not deteriorating either.”