AXA Private Equity, the private equity unit of the insurance giant, has raised €1.6bn (US$2.47bn) for its fourth generation leveraged buyout fund, which focuses on mid-sized companies in France, Italy and Germany.
Fund IV is more than three times the size of its predecessor, which raised €500m in 2005. AXA Private Equity said that 95% of existing international investors in its previous LBO funds reupped for the fourth vehicle.
AXA LBO Fund IV targets investments in France, Germany and Italy with capitalisations of between €100m and €2bn.
Approximately 25% of the fund has already been invested in three transactions: the secondary buyout of French ingredients supplier Diana Ingredients from Cognetas for an enterprise value of €710m last June; Unipex, the former Active and Specialty Chemical Ingredients division of Canada’s Atrium Innovations, purchased in April for US$155m; and, the same month, the acquisition of Löwenplay, Germany’s second largest operator of games arcades, for an undisclosed sum.
Talking recently, Philippe Poletti, managing director of the Paris branch, suggested that, despite the increase in available capital through the new fund, AXA Private Equity will focus more keenly than ever on the flight to quality.
“There are less assets on the market so there is even more importance on the quality of the asset and the growth perspective,” he said. “You are putting in higher levels of equity so the target has to be of very high quality. For high quality assets you will always find buyers, if not in Europe then further afield.”
Poletti added that his firm’s track record has proved essential, along with its parent group’s reputation. “We are still able to source deals and make transactions that are not broadly marketed because of the image of the team, what we have done in the past and the AXA brand name. For that reason, it is probably easier for us to raise money from banks and close deals than some investors as it is not purely a syndication issue.”
Christof Namenyi, a managing director in the Frankfurt office and who led the Löwenplay deal, agrees that the AXA group plays an important role in the brand, but emphasises that the private equity arm is not a captive fund and that AXA Germany operates separately from the team in Paris as well as the ones in Asia.
The German team, says Namenyi, has doubled in the last 18 months as has activity, but there is no pressure to invest and a similar commitment to quality. “Twelve months ago, the banks were giving away so much money you could almost only lose if you didn’t go through an auction, but with Löwenplay, it was hard to find banks to finance a deal of that size,” he says.
As a result, concludes Namenyi, the structure of some deals have changed, potentially pushing those who are under pressure to do deals now to make decisions that may could prove costly: “We’ve seen deals with 40% to 45% equity. There is a lot of capital in the market, so people have to invest. When there is pressure to invest, some people will take a decision and accept low internal rates of return or hope that the situation will improve fast and can be turned around with a recapitalisation.”