Turnaround Investor

If running a private equity house is a daunting prospect, then taking the reins of a firm with more history behind it than many nation states must be terrifying. Yet Jean-Bernard Lafonta, the chief executive of France’s Wendel Investissement, has risen to the challenge since he took the role in 2002.

The organisation wanted to change and create a different perception among investors Jean-Bernard Lafonta, CEO, Wendel Investissement

Wendel has a claim to be one of the world’s oldest private equity investors, having first entered the game when its founding family invested in an iron works in Lorraine in 1704. However, until the early 21st century it generally acted as a holding company, acquiring minority stakes in publicly listed companies and doing little with them.
 
But by June 2002, Wendel had decided it was time for a change, and former CEO and executive board chairman Ernest-Antoine Seillière chose Lafonta to lead the charge. “The organisation wanted to change and create a different perception among investors – that was the challenge,” he explained in a recent conversation with our sister publication Private Equity International. 

Lafonta: transforming Wendel

Lafonta, then aged 39, had not previously worked in private equity, but had overseen retail, strategy and capital markets operations at BNP Paribas, and spent a stint in the M&A department of Lazard. However, he decided that the best way to reposition Wendel was to make it a fully fledged private equity firm, an entity that would make investments of more than €100 million to acquire controlling interests in unquoted companies.
 
Since Lafonta took charge, Wendel has made a number of major investments, notably September 2002’s €5.1 billion buyout of French electrical equipment maker Legrand alongside Kohlberg Kravis Roberts, the largest European buyout ever made to that time. Around 83 percent of the companies it holds are now unlisted, and its portfolio is now worth a combined €3.72 billion.
 
There are signs that the new strategy is paying off: the firm says it is generating an aggregate IRR of 25 percent, compared to its 15 percent target, and its shares have been outperforming the CAC 40 Index, France’s answer to the FTSE 100, by a factor of 2.5. A vote of confidence in Lafonta’s leadership came when he replaced Seillière as chairman of the board last June. He says that his plans for the future include expanding Wendel’s investment range into larger deals in the €300 million to €1 billion bracket.
 
Inevitably, though, there is some work left to do. Recent French press reports described Wendel’s half-year report as “disappointing”, and on 22nd September the firm’s share price fell 3.82 percent to €84.45. But Lafonta says that this reflects the level of anticipation that preceded the results, as well as the French market’s relative lack of experience of private equity.
 
“You have to bear in mind we are in new territory regarding the share price,” he told PEI, “particularly in terms of having a premium over net asset value, which is a first time an investment company has achieved this in France. Some investors step back and ask themselves whether that premium is justified.”
 
Lafonta must be hoping that, under his leadership, Wendel can continue to show that private equity can create more value than meets the eye.

A feature-length profile of Jean-Bernard Lafonta appeared in the November issue of Private Equity International. For more information, visit www.privateequityinternational.com.