UK buyout house Candover, which has taken a more cautious approach to expansion into Continental Europe than have many of its peers, has now established a foothold in France.
The formation of Chevrillon Philippe Candover (CPC) formalises an existing collaborative relationship between Candover and Chevrillon Philippe, France’s largest independent asset management company. This relationship first bore fruit earlier this year with the FFr 300 million (ecu 45 million) buyout of MC International, Candover’s first French lead. Previously, Candover’s exposure to the French private equity market was confined to its investment in funds managed by Ciclad Investissements, a development capital and smaller buyouts specialist.
Chevrillon Philippe Candover, a 50/50 joint venture, was established to source French buyouts of FFr 300 million or more; equity for deals originated by CPC will be provided by Candover-managed funds and by client funds managed by Chevrillion Philippe on a discretionary basis. Both parties have a right to invest in each CPC-originated deal, but are not obliged to do so, and the partners will therefore make their investment decisions separately. In deals where both parties choose to invest Candover will normally supply the bulk of the equity, but no pre-set ratio for co-investment has been established, according to director Colin Buffin.
Chevrillon Philippe, established in 1992 by Cyrille Chevrillon and Nicolas Philippe, specialises in M&A, private equity investment, private banking and unit trust management and manages FFr 4 billion. Recent private equity transactions undertaken by the boutique include the buyouts of Imprimeries Bussi?res, MC International and Cie Finestate. Chevrillon Philippe has a good reputation in the French M&A market, and its corporate and intermediary contacts are expected to generate a flow of investment opportunities for the joint venture.
Initially, Cyrille Chevrillon and Candover’s Martin Calderbank, based in London, will handle CPC’s day-to-day operations. Colin Buffin said the partners plan to recruit additional executives, to be based in Paris.
It is an open secret that, to date, many players in the French private equity market have seen dismal returns. Discussing the timing of Candover’s move into France, Colin Buffin stressed that CPC “is a long term initiative: looking ahead ten years, given the way European markets are developing, Candover will need to have a stronger presence in the Continental markets. However, in the short to medium term, the great majority of our investments will still be in the UK”.
Cyrille Chevrillon described the establishment of CPC as timely, explaining: “The corporate restructuring programmes being undertaken by both local and foreign companies following the recession will drive investment activity in the French marketplace over the next five years”.
Candover also has a presence in Germany, most recently via the LGV-Candover joint venture. However, although the group backed a number of German deals with previous partners, it has not invested in either of the buyouts, Tally and Burkhalter, completed since LGV-Candover was established two years ago.
In the Netherlands, Candover has a flexible alliance with Alpinvest, which is an investor in Candover funds. This relationship was reinforced in mid-1997, when Candover took a stake in Alpinvest on the Dutch private equity group’s flotation.
The relative difficulty of achieving exits in Continental markets compared with the UK has been the principal reason for Candover’s circumspect attitude to European expansion. Against a background of maturing Continental private equity markets and increasing competition at home, the group now appears to be laying the groundwork for a stronger European presence in the longer term. However, for the foreseeable future, its business is likely to remain strongly UK-focused. Colin Buffin predicts that, five years hence, European investments will account for less than 20% of Candover’s business.
Meanwhile, fund raising is continuing for the Candover 1997 fund launched late this summer. Market rumours, unconfirmed by Candover, suggest that this vehicle is likely to come in at well above its stated o650 million (ecu 965 million) target, with a number of sources citing a figure of GBP800-900 million.