Societe Generale, which has established itself as a force to be reckoned with in the senior debt market in recent years, is now entering the European buyout market as an equity player, with aims to establish itself in the top rank of European buyout houses.
The bank has made a global private equity allocation of $1 billion (ecu 900 million), of which $250 million is earmarked for European buyouts. Philippe Sevin, formerly of Eurosuez, has been appointed as head of European private equity and will establish the SG Private Equity business with the support of directors Bruno Lambert and Philippe Renie, who worked alongside him at Eurosuez. Jim Lane, who was previously with Goldman Sachs, will spearhead Societe Generale’s American private equity operations.
Outlining the strategy SG European Private Equity will adopt, Philippe Sevin said initially the group will target four geographic areas: France, Germany, Italy and the Netherlands/Belgium. While SG Private Equity is not precluded from investing in the UK, and would consider Oco-investment in sensible dealsO should the opportunity arise, the group will not actively seek to establish a position in the crowded UK buyout market. “The UK being what it is at present”, said Sevin, “the last thing it needs is another buyout player, and we do not currently see much potential to add value in this market”.
The SG Private Equity team will, nevertheless, be headquartered in London, alongside the bank’s rapidly expanding corporate finance team. The decision to base the business in the UK signals that Societe Generale is addressing the private equity market as an international, rather than a French, player and will be adopting an “Anglo-Saxon” approach.
Societe Generale’s existing international private equity exposure has been via fund investments, totalling some $300 million, which were made Oprimarily to forge relationships with other investors’, Philippe Sevin said. He declined to comment further on the group’s fund portfolio. However, through its Soginnove subsidiary, Societe Generale is a long-established venture capital investor in its domestic market, and the group also has an extensive portfolio of French development capital investments, valued at approximately FFr 2 billion (ecu 300 million).
While SG European Private Equity will initially invest from its parent’s allocation, it intends to raise a third-party fund, sponsored by Societe Generale, once it has established a market presence. Establishing a proprietary deal flow, the bulk of which will be generated independently of the SG corporate finance network, will therefore form a key element of the new business’s strategy. Given current appetites for European private equity, and the speed with which a previous new entrant to the European buyout market, CSFB, has raised its first external fund, observers expect SG European Private Equity to go out to the market sooner rather than later, despite its novice status.
SG European Private Equity will shortly add German and Italian nationals to its team and aims to build a team of 12 investment professionals by the middle of 1998; meanwhile, it expects to close its first lead deal before the new year.
In addition to its existing portfolio of fund investments, Societe Generale has allocated $300 million for investment in North and South America. The group is now targeting direct US investments, as well as continuing to invest in other funds, Jim Lane said. He heads a team of four, which also includes Frank Potto, formerly of Odyssey Partners, Elan Schultz, previously with DLJ, and Justin Hale Tipping, previously a venture-backed entrepreneur. In the Americas, SocGen will invest in later-stage venture situations, LBOs, consolidation plays, and possibly some turnarounds, and forecasts an investment rate of $100 million per annum. The $150 million balance of the $1 billion global private equity allocation will be invested in the Far East and other emerging markets.
“With the announcement of a European and international investment strategy, Societe Generale is sending a signal that it takes the private equity business, which is now a major market with established rules, very seriously”, said Philippe Sevin: “We are aware that we are a late entrant and will need to work not only harder, but smarter, and are committing significant resources in terms both of money and of people”.