LBO France postpones fund launch

The turbulent economic environment in Europe and uncertainty over the outcome of the forthcoming French presidential election led LBO France to delay the launch of its next mid-market fund.

French buyout group LBO France has delayed the launch of its next ‘White Knight’ mid-market buyout fund, according to sources close to the situation.

The firm started pre-marketing for the fund – called White Knight  IX – in the fourth quarter last year, and planned to launch it formally in the first quarter this year. However, it will now be launched between June and September, a source said.

The firm declined to comment on fundraising plans.

LBO France has an impressive track record according to investors, and triumphed in Private Equity International’s ‘Firm of the year in France’ category in the 2011 awards despite fierce competition.

One of its recent highlights was the $3.2 billion (€2.2 billion) sale – alongside co-owners Equistone – of power storage business Converteam to General Electric last year. That price equated to a 13x multiple to the company’s earnings before interest, tax, depreciation and amortisation. LBO France acquired a third of the business in 2008 alongside Equistone (which re-invested for a one-third stake) and management in a €1.6 billion deal.

Yet in the current market, even strong recent returns are no guarantee of fundraising success, and timing a fund launch has become a key issue.

“It would have been difficult, given the Greek situation, to go to the US and sell a Euro-denominated fund to investors,” a source close to the situation said. “The mood wasn’t right and it would have been difficult to raise a new fund quickly. There’s also the uncertainty over the outcome of the French presidential elections, which I think also persuaded them to delay the fundraising,” the source added.

The incumbent President, Nicholas Sarkozy, currently lags Socialist challenger François Hollande in the polls ahead of the May election. Hollande is an avowed enemy of the financial community, calling the financial sector his “greatest enemy”. His promise to increase regulation and income tax for the rich has also caused consternation in France.

After the launch of White Knight IX later this year, LBO France is also understood to be planning to raise a new ‘Hexagone’ fund in 2013. Its Hexagone funds focus on small-cap investments, whereas its White Knight vehicles target mid-market deals. The firm’s most recent small-cap fund, Hexagone III, raised €180 million in 2009 and is less than 50 percent invested according to a source.

For in-depth analysis of the French private equity market, read the May editon of Private Equity International magazine.