Lazard PE unit retrenches

The French private equity business of Lazard is to concentrate on its domestic market after dropping plans to expand into the US and Southern Europe and closing an office in Frankfurt.

Two years after launching its international unit, Fonds Partenaires, the French development capital subsidiary of Lazard, the investment bank, is to wind down its overseas operations. Original plans to launch a transatlantic fund for investments in the US and Europe have been shelved following the decline in the US markets.

According to French business daily L’Agefi, the business, headed by Gilles Etrillard and Jerome Balladur, will now focus solely on the French market.

Plans to expand into Southern Europe have also been axed. The firm’s Frankfurt-based operations, which had struggled to get a foothold in the tough German market, will also close.

Fonds Partenaires' director of international operations Gilles Laporte, former head of French insurance group Groupama, is to leave the firm. He is thought to be planning his own advisory company.

During the past two years, the team has been reduced from around 15 to ten professionals, focussing on mid-market opportunities in France involving companies with a turnover of between E15m and E150m.  “This sector offers superior returns over the coming years,” said Gilles Etrillard. This has been partly on account of the traditionally lower level of competition compared with the large cap buyout sector. This though is changing with firms such as Chequers Capital which recently closed a E300m fund, making a push into the French mid-market space.

The firm raised E170m for the Partenaires Midcap fund in 2000, which is currently 40 per cent invested in five businesses and is close to announcing another investment. Three of the fund's existing investments, Cognon Morin, Laboratoire des Granions, Pressor & Galicier, were made in the last year.

Fonds Partenaires Gestion is currently raising a new E100m fund which will follow the strategy of the Midcap fund, although it will have a separate investment policy.

The unit has also delayed fundraising for Partenaires III until 2004. Its predecessor fund, aimed at larger deals than Partenaires Midcap, raised E146m in 1996 and is fully invested in nine companies including Panzani, Sandinvest and Mondial Tissus.

Partenaires III is expected to bridge the gap between the firm’s two other funds, covering the larger mid-market sector. It will target businesses with turnover of up to E250m to E300m.