Investment funds ready to pay even more than before the pandemic

Investment funds ready to pay even more than before the pandemic

The sector, which has raised a lot of money in recent years, is well equipped to take advantage of the crisis.

Earlier this year, experts wondered about the health of private equity: Has a bubble formed above funds investing in unlisted companies? Is she about to burst? Ten months and a pandemic later, the question is no longer relevant.

Admittedly, 2020 has not been rosy for everyone and some funds have companies positioned in sectors affected by the crisis (tourism, hotels, etc.) in their portfolios. But solutions exist to stay invested in the long term, the time they straighten their heads.

The sector, which has raised a lot of money in recent years, is well equipped to take advantage of the crisis. The funds have a $2.5 trillion war chest to invest globally. This allows them to be very active. In France, they have increased operations in recent months; in July, Ardian and KKR entered the capital of Elsan, co-leader in private hospitalization in France. Antin Partners has become the reference shareholder of Babilou Family, the leader in company crèches in Europe. The investment company Silver Lake bought Meilleurtaux from a Goldman Sachs fund for nearly 800 million euros. And PAI Partners recently took 60% of the capital of Euro Ethnic Foods (EEF), the shareholder of the grocery departments of Grand Frais.

Pay the full price

These players are ready to pay a high price to get their hands on a company in very good health, positioned in a buoyant sector. As these nuggets are rare and demand is high, acquisition prices are often higher than before the crisis.

Private equity firms will be even more active next year as the opportunities will be significant. “The market is huge for the sectorconfirms Hubert Preschez, co-director of banking at HSBC France. These players benefit from good financing conditions and they are in better shape than many of their industrial competitors.” In France, they are eagerly awaited in the health sector.

“With the crisis, funds are even more focused on high-margin sectors, such as healthcare, technology or specialty chemicals or certain types of services”, notes Emmanuel Regniez, managing director investment banking at Citi. The market will also be driven by assets, often of good quality (health, etc.), that the funds will put on the market after having postponed their sale.

Large-scale operations are also expected: the funds, more and more powerful, are indeed more and more ambitious. In February, a consortium of investors around the American Advent and the British Cinven got their hands on the elevator division of Thyssenkrupp for 17.2 billion euros. Other operations of this type could see the light of day. Ardian and Antin are studying a takeover bid on Suez, a competitor to that of Veolia. These trends are likely to continue as private equity will continue to raise funds. And this, without difficulty: in this period of permanently low interest rates, the sector remains one of the most profitable investments for seasoned investors.