For most French GPs, 2012 was a year to forget. The industry was dragged into a protracted row about taxation, while the economy suffered due to the ongoing crisis in the Eurozone. This took a heavy toll on activity: buyout deals totalled just €6.1 billion last year, less than half the €15.2 billion figure for 2011, according to mergermarket.
The good news is that dealflow seems to be picking up again; at press time, rumours were circulating about a possible €3.5 billion buyout of Elior, a French catering company, in what would be the largest takeover in continental Europe since the collapse of Lehman Brothers. Credit availability also seems to be improving, helped by a boom in high yield bond issuance at the higher end and a better range of lending options in the mid-market.
And yet many challenges remain: financing remains selective, pricing is still an issue, and sourcing deals is much harder than it used to be. And crucially for the industry’s medium-term future, the fundraising markets remain closed to many GPs. “I call it our own Death Valley: a part of the French private equity industry is dying of thirst because few French institutions invest in it,” says Louis Godron, chairman of AFIC, the French private equity association.
This year is unlikely to be as bad as the last. But as Stéphane Davin, a partner at Baker & McKenzie’s Paris office, puts it: “Nobody imagines that 2013 will be a fantastic year for French private equity.”