During a turbulent year for the Eurozone, 2017 saw excellent growth for French Private Equity.
The French Private Equity sector raised global assets of EUR8.1 billion in H1 2017, a 30% growth compared with the same period the year before. 2017 also saw a record level of corporate deals; €209.1bn worth of deals were made involving French firms, a level not seen since 2007.
The sector has been steadily growing since 2015, and this growth accelerated last year due to the pro-business policies of President Macron, and the new tech start-up scene which has emerged in Paris as a result.
With strong fundraising and deal activity likely to continue in 2018, now’s a great time to look beyond London and towards Europe’s second largest economy.
A victory for the centre:
Elections and political uncertainty usually result in a deal slowdown, as investors put off decisions while waiting on the outcomes of unfolding events. However, Emmanuel Macron’s election in May 2017 over far-right candidate Marine Le Pen was hailed as a victory for stable, centrist politics, and was welcomed by the financial world.
As one investment bank head put it: “Macron is a positive influence as a more stable and business-friendly environment is likely to prevail for a few years.”
In his first year as President, Macron (formerly an investment banker) has pushed forward economic reforms including corporation tax cuts, wealth tax exemptions and public spending cuts. These policies have made France an attractive destination in the eyes of Private Equity GPs.
The stable and welcoming economic situation in France is in stark contrast with the uncertain situation across the Channel. Uncertainty over the outcome of the UK’s Brexit deal may have accelerated French Private Equity growth, as investors who would traditionally have been drawn to London look further afield. French Private Equity firm Ardian raised €4.5bn in four months in the wake of the Brexit vote, as a result of increased interest from international investors.
The French Private Equity market is currently dominated by domestic investors, who made up 63% of funds raised in 2017, but this could be set to change in 2018 should the UK opt for a ‘hard’ Brexit.
Paris’s start-up boom:
France’s growing technology and start-up scene are also fuelling investor interest, providing an ample supply of attractive new companies for buyout teams.
Paris has long been seen as a relatively traditional city, with extensive regulation and red tape. However, Macron’s new business-friendly cuts to corporation tax, as well as research tax credits, have resulted in a huge growth in technology companies and start-ups.
There are now over 9,400 start-ups across France, attracting venture capitalist funding of over €2 billion. As this sector develops, these companies will provide a steady supply of opportunities for Private Equity investors. Technology assets are currently hot property in the Private Equity world, as investors look towards tech companies to provide higher levels of growth in to justify the current high valuations. This new wave of Paris-based start-ups could be key to unlocking large returns.