Place Vend^me is a stunning example of late 17th century Parisian city planning. Designed during the reign of Louis XIV, the rectangular square is lined with a collection of elegant arcaded buildings now famous for hosting some of the city's finest diamantaires, or jewellers. Their shop windows are impossible to miss, but only a closer look reveals that a handful of financial services companies reside here, too. Number 20 is the home of AXA Private Equity.
Situated on the first floor of the building, and no less impressive than the square itself, is the office of Dominique Senequier, the tenant's chief executive, with high ceilings and delicately arranged furniture. A massive wall mirror dominates the room, flanked by large windows that offer an exquisite view of the bronze column in the centre of the square, with its statue of Napoleon on top.
The imperial surroundings provide an apt setting for AXA Private Equity's centre of command. From here, Senequier oversees the firm's burgeoning realm, which has outposts in Frankfurt, London, New York and Singapore and most recently opened an additional office in Milan. Founded in 1996, the private equity arm of French insurance giant AXA has amassed more than €10 billion of capital under management.
You now find private equity on the front page of French newspapers, which would have been unthinkable until recently
In terms of its capital deployment capabilities, AXA Private Equity has grown into a force to be reckoned with. Its first ever fund, a 1996 vintage buyout fund investing in France, raised €95 million. Nowadays the numbers are of a significantly higher order.
The firm's fund of funds investment team, for example, now tracks 500 individual funds and aims to invest €2 billion per annum in primary and secondary partnership interests. In addition, the firm is an increasingly active direct investor, buying mid-size companies outright and co-investing in large transactions alongside the world's leading LBO sponsors.
In France and Germany alone, the company's mid-market funds have completed 35 acquisitions of businesses worth up to €500 million. As a co-investor in big buyouts, the firm recently took a large stake in a €3.3 billion investment in TDF, a French television and multimedia company, alongside Texas Pacific Group. Venture capital, growth capital and mezzanine expertise are also part of the platform.
A significant portion of the group's capital comes from AXA itself, which has more than €1 trillion in total assets and an annual commitment of approximately €1 billion to its private equity division. In addition, AXA Private Equity has some 180 third-party LP clients in France, other parts of Europe, North America and Asia, according to the group's marketing material.
THE POINT OF PRIVATE EQUITY
Market participants familiar with the firm's history and inner workings say that AXA Private Equity's multi-strategy design is entirely Senequier's.
She joined AXA in 1996, having started her career as a civil servant before switching into business in order to avoid “death by boredom” as she puts it. She first went into reinsurance before moving on to finance and asset management. People who have worked with her at AXA Private Equity describe her as charming, driven and firmly in control of her business.
We need to behave in a certain way to survive.We need to manage our funds well and have strong values so that we can be part of the club of leading private equity firms 10 years from today
The charm is easily detected. During the interview with PEI, Senequier, who comes from the South of France, is chatty and likes to laugh. It is a wide-ranging conversation, and before we get onto industry matters, she talks at some length about the recent renovation of parts of the building. The architect's plans are still on her mantelpiece. The landlord, an Irish property investor, only saw the new design after the work was finished. Thankfully he liked it very much, she says.
Then she turns to private equity. Flicking through a back issue of PEI, she comes across an interview with Wim Borgdorff, head of fund investments at AlpInvest Partners in Amsterdam, one of the largest limited partners in the asset class. She dwells on the opening paragraph for a moment, then looks up. “Wim is one of the most important men in Europe, and people don't know it,” she says.
The comment may seem surprising, but what Senequier is alluding to is the fact that through AlpInvest, many billions of euros of pension savings are being channelled into private equity to provide for the retirement of millions of Dutch workers. This is what intelligent pension planning should look like, is her point: “Due to the size and health of the Dutch retirement system, it will be more comfortable to live on one's retirement plan in Holland. The pension fund industry doesn't exist yet in France, and so the local private equity companies are not yet enhancing the returns of pensions for French people.”
But even though French pensioners are still finding it harder than their European neighbours to access the asset class, private equity is nevertheless topical in the country at the moment. As private equity funds and the size of their investments in France continue to mushroom, they are attracting the same kind of attention in the national press as they are elsewhere. “You now find private equity on the front page of French newspapers, which would have been unthinkable until recently,” Senequier notes.
She argues that in order to avoid controversy and any lasting damage from it, private equity firms must have strong ethics and abide by them. This she believes should not be difficult: “Private equity has good values. Take KKR for instance: Henry Kravis has been very good at picking certain core values and building and maintaining a reputation around them.”
Elaborating on the theme, she says: “Dealmaking is of course paramount for a private equity firm, but it's important not to do deals at any price. For example, you need to balance your financial objectives with those of the entrepreneurs you are backing. Sometimes private equity firms don't pay enough attention to management – putting them under too much pressure, being arrogant, using excessive leverage.”
Making sure that AXA Private Equity's own code of conduct is in line with this philosophy is part of her role as CEO: “I spend a big part of my time thinking about the future, and we need to behave in a certain way to survive. We need to manage our funds well and have strong values so that we can be part of the club of leading private equity firms 10 years from today.”
Building the organisation further is another key component of Senequier's job, especially in terms of people.
Sometimes private equity firms don't pay enough attention to management – putting them under too much pressure, being arrogant, using excessive leverage
Some of the managers who joined the firm during its first decade in business have not endured in Senequier's team. The firm has experienced some turnover over the years, notably in the satellite offices outside the French homeland. For instance: Chuck Flynn, a senior fund investment specialist in the firm's New York office, departed in 2001 to join Deutsche Bank and later Bregal Investments, a family office. Sasha van de Water, a former managing director in the fund investment team in London, set up Keyhaven Capital, an independent investment firm, in 2003. London-based managing directors David Hutchings and James Pitt left their posts in 2006, as did Barry Miller, a senior investment officer in New York.
One former (non-French) employee describes the group thus: “It's a French-based, French-run company. Dominique is a sharp operator who had to break a few eggs to get to where she is today. What she's built is a multi-fund franchise run from the centre similar to a DLJ Merchant Banking or a Blackstone. They've had to reshuffle on occasion, but I know of no other insurance company that has come even a third of the way of where they are in private equity.”
Senequier agrees that AXA Private Equity's French roots, like her own, have been a factor in the firm's evolution. Acknowledging that she cuts an unusual figure in the private equity business, she says: “There are two particularities about me: I am French, and I am a woman. That's not very common in this kind of job.”
Hiring and retaining non-French professionals can be a challenge, she continues: “It is often seen as less attractive to be part of a French organisation, especially among the British. Young US professionals mind it less, especially if they have travelled. But if they're good, they're also expensive.” According to an outside source close to the firm, AXA Private Equity operates a carried interest scheme for its professionals in order to motivate and foster longevity.
In the meantime, the internationalisation of the firm is ongoing. The working language in all offices is English. Stephan Illenberger, who heads up the group's German team in Frankfurt, is the non-French member of the five-strong executive board, where he sits alongside Senequier, Dominique Gaillard (head of direct funds), Vincent Gombault (funds of funds) and Christophe Florin (AXA Private Equity Asia). In addition to running Germany, Illenberger co-ordinates the firm's global asset allocation strategy and has recently been put in charge of corporate communications.
PICKING THE WINNERS
Senequier doesn't say it explicitly, but there clearly are plans to grow the franchise further. AXA Private Equity has established itself as an important player in the private equity industry globally, and it won't let go of its seat at the table voluntarily.
As the end of the interview approaches, I ask about the least expected development in private equity she has seen in recent years. “The growth”, she says without missing a beat. “The industry is now enormous.”
She pauses for a moment, then continues with a smile: “The size of funds today worries me a little. It means more work trying to pick the groups that will survive the next ten years.”
Picking tomorrow's winners won't be easy, I suggest. She laughs and disagrees: “I think we'll have a much clearer idea in a few years' time already.”