PRIVATE CAPITAL IN SOUTHERN EUROPE: FRANCE

Following the election of Emmanuel Macron last year, France has emerged as one of Europe’s more vibrant economies. In particular, it is building its tech sector in advanced areas such as artificial intelligence and attracting increasing investment from tech leaders, including IBM and Microsoft. Macron has been a welcome voice of internationalism, attempting to preserve the nuclear deal with Iran, for instance, and imploring European countries not to turn their backs on migrants. His recent promise to grant citizenship to a Malian illegal immigrant who saved a child dangling precariously from a balcony – taking the time to meet the man in person – was a welcome gesture at a time when other Western nations are moving in the ideologically opposite direction. Given that France faces its own emerging nationalist and far-right political movement, these achievements should not be taken lightly. 

The hope now is that France can carry on this momentum in both policy and business. Its economy still needs to find its growth engine; its GDP expansion, at just 0.3 per cent in the first quarter of 2018, is hardly stellar. But as I argue in these monthly newsletters, it’s important to look beyond the headline figures if we are to understand where countries across the Mediterranean are heading. Sometimes it’s the data that doesn’t make the news that gives us a richer picture of both how individual countries are faring and how commercial relations between them are evolving. 

  ILLUSTRATION BY  COSTAS MANTZALOS

ILLUSTRATION BY COSTAS MANTZALOS

Investing for tomorrow: Private Equity and Venture Capital

Private equity and venture capital are prime examples of this. Both can, in different ways, show us how investors view the medium-term prospects of either a sector or a wider economy. France’s private equity industry is in the higher tier of the European league; it expanded by 30 per cent year-on-year in the first half of 2017, raising €8.1 billion for investment both nationally and in the wider continent. Overall, deals are focusing on both start-ups and small SMEs, with around €1 billion in total, and an average deal size of €1 million, and large SMEs and mid-caps, with an average deal size of €27 million.[1] While still behind the UK in terms of the total volume of deals, France has steadily narrowed the gap.[2] In 2017, Paris had the second-highest number of venture capital deals of any European capital.[3] While most private equity funds raised in the first half of 2017 came from within France – some 67 per cent – the rest came from beyond.[4]

In the last newsletter, we looked at cross-border private equity and venture capital from Spain into France and Italy. Continuing that theme, how active are French funds in its near Mediterranean neighbours? While most deal-making happens within France, there are signs of cross-border flows. 3i Group, a global private equity player expected to relocate to continental Europe due to Brexit, has one managing director – Rémi Carnimolla – managing both France and Spain.[5] Its investments include Etanco Group, a construction firm involved in projects including Spain’s Le Salve Bridge and a Mormon temple in Rome, and Trescal, an engineering firm active in aerospace, automotives and electronics among other areas, with seven labs in Spain[6] and eight in Italy.[7]

While some French PE and VC firms are closer to Germany and the US than the Mediterranean – Partech Ventures’ offices outside Paris, for instance, are in San Francisco and Berlin – some French funds are spotting opportunities in countries closer to home. 

Ardian, one of the most highly active funds in Europe, has offices in both Milan and Madrid.[8] Its deals in Spain cover diverse sectors, from food manufacturer Monbake, with 1,700 staff and 11 manufacturing plants, to T20, a digital media agency whose clients include Honda, UniCredit and AXA Insurance. In Italy, Ardian deals include Dynamic Technologies, an engineering firm, and Tolve Windfarms. 

Another French firm, Spirarex, works with Italian mid-market firms, and has been present in Spain since 2004, as well as venturing across the Mediterranean into Tunisia, in partnership with AfricInvest, a $1.2-billion firm active in 25 African nations, and Morocco. Spirarex has notched up 50 per cent growth in cross-border sales of mid-market investee companies over the past five years overall. It has an interest in digital technology – including Yoopies, a social platform for childcare and home-care services present in Italy and Spain – while in Italy it has taken positions in everything from hotels to children’s clothing.[9]

Digging into the data

In today’s information blizzard, it is inevitable that we’ll lean on snapshots such as GDP, stock market movements and bilateral trade data. But sometimes, taking a closer look at more granular numbers can reveal much more about the niches and opportunities where Mediterranean capital is seeking growth. MGI’s portal collates hundreds such data points to help investors. We hope it will contribute to a richer, more pixelated map of commerce in the Mediterranean. 

Cleopatra Kitti was in conversation with Adam Green

[1] https://www.privateequitywire.co.uk/2017/10/13/257129/french-private-equity-sector-raises-eur81bn-h1-2017
[2] https://www.pwc.pl/pl/pdf/private-equity-trend-report-2017.pdf
[3] https://pitchbook.com/news/articles/country-focus-frances-private-markets-primed-for-further-growth
[4] https://www.privateequitywire.co.uk/2017/10/13/257129/french-private-equity-sector-raises-eur81bn-h1-2017
[5] https://www.3i.com/media/1565/pei-france-roundtable-31-05-17.pdf
[6] https://www.trescal.com/en/location/country/10
[7] https://www.trescal.com/en/location/country/9
[8] https://pitchbook.com/news/articles/country-focus-frances-private-markets-primed-for-further-growth
[9] https://www.siparex.com/

News — June 2018
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