New French legislation could soon mean private capital is more aligned with the population outside of the finance industry.
France’s parliament will vote in April on legal reforms that would introduce a tax-efficient system to distribute a portion of capital gains among all employees of an acquired company. It comes amid demonstrations by the gilets jaunes, or yellow-jacket movement, over rising fuel prices, the cost of living and government tax reforms disproportionately impacting the less-wealthy.
“[The reforms are] a good answer to the fact that financial people are not just greedy people not taking care of the other stakeholders of the French economy,” France Invest chairman Dominique Gaillard, who is also a senior advisor to Paris-headquartered Ardian, told Private Equity International.
Gaillard said the movement has had a limited impact on private equity, citing a January poll assessing investor confidence in France.
“What I consider was the highest risk for the PE community was the deterioration of the image of France when you are fundraising,” he noted.
“In fact, most of the investors said it’s a small problem for us; it doesn’t deteriorate the image of France because we know that Macron is making reforms and that goes into good relations. So I’m less pessimistic than I was before Christmas.”
French private equity funds raised $12.9 billion in 2018, up from $10.1 billion the previous year, according to PEI data. Private equity deployed €57.1 billion into France across 428 deals last year, compared with €60 billion across 608 deals in 2017, according to Pitchbook’s Q4 European Private Equity Breakdown Report.
“The market is quite hyped in terms of valuations,” Gaillard added. The main difference between now and the global financial crisis of 2008 is a greater focus on value creation.
“Most of the GP players are very well aware today that they buy at rather rich prices, so they need to have a very clear view before making the check to invest in companies of the value creation path that they are going to follow.”