AXA Private Equity is one of the most diverse private equity fund managers in the business, with venture capital offerings, LBO investments, fund of funds and mezzanine vehicles all included under the AXA umbrella.
With such a wide range on show, the organisation is presented with a unique challenge when it comes to handling the vast range of products it offers and the widely different strategies each employs, and the benefits of such a suite of funds in times of economic turmoil.
EVCJ speaks to Dominique Senequier, CEO of AXA Private Equity, about how the firm works, how it’s faring in these difficult times and what the future holds for a firm which currently manages US$22bn of assets.
Take us back to when AXA Private Equity first started out. How has the business evolved to the private equity giant it is today?
When the AXA Group made the decision to launch a distinct private equity investment operation in 1996, the objective was to set up a third-party client business. Claude Bebear and Henri de Castries gave the instruction that, for every franc committed by the AXA Group, two francs should come from external sources.
Initially, AXA Private Equity raised €100m to invest in European leveraged buyouts. Then, in late 1996, the AXA Group bought UAP, which had a private equity portfolio of international funds. We took a creative approach to growth and formed a new area of expertise with the launch of a secondary business.
Having adopted this strategy, we have successfully developed a diversified business which is also one of the largest private equity houses in the world.
Explain your business strategy, how do the different business segments sit together and complement each other?
Our strategy is to support the growth plans of dynamic entrepreneurs worldwide in every sector of the economy and through all stages on the investment cycle, from birth to maturity. AXA Private Equity provides entrepreneurs with more than just financing however. We give entry-level advice as well as hands-on strategic and operational guidance.
Generally speaking, AXA Private Equity targets investment opportunities which involve rapidly-growing and medium-sized companies, or developed companies showing solid and recurring profits.
Given the broad focus of AXA Private Equity, it would be difficult to give one definition to our investment strategy. Our approach varies according to the specific requirements of each transaction. Nevertheless, every investment undertaken by AXA Private Equity shares a number of important characteristics.
Firstly, we conduct in-depth research into the strengths and weaknesses of each potential investment until we are satisfied that the opportunity has the potential to make sizeable capital gains for its investors.
We then work closely with the management teams of portfolio companies to agree a long-term exit strategy. We also monitor closely the performance of these investments, so that we can help those companies with any difficulties.
In addition, AXA Private Equity works with local partners in every country in which it operates. This allows us to maximise the development potential of our portfolio companies and enhance their earnings capacity
Finally, each of our funds has a dedicated investment committee and independent experts give their opinion to AXA Private Equity’s managers to ensure best practice, before the committee.
What would you say is your main area of strength?
Having an international network of top-tier investors as well as US$22bn under management has been crucial to our success. The growth of AXA Private Equity can also be attributed to our firm-wide credit discipline; we analyse the business model of every prospective investment for its potential to deliver operational value. Then, by working closely with the management of those companies in which we invest, AXA Private Equity is able to develop the most effective growth strategy for that business.
How has the credit crunch affected your business?
Our diversified investment approach not only helps to protect us against the impact of the credit crunch but also provides us with opportunities during each stage of the economic cycle.
For instance, while the values of our portfolio companies have started to stagnate or slightly decrease, the decreased availability of debt has led to fantastic opportunities for our mezzanine fund. In addition, secondary fund investments will be stimulated by the need of some institutional investors to sell their portfolio both quickly and at a discount price.
Elsewhere, activity in infrastructure, a key sector for AXA Private Equity, has not yet been affected. And, despite the decreased availability of debt, there is still financing available for mid-market leveraged buyouts. Only the last month, we completed two deals; the US$155m LBO of a business division of Quebec-based Atrium Innovations, as well as the acquisition of German amusement arcade operator Löwen Play from Waterland Private Equity.
Our investors appreciate our robust strategy. Despite the uncertainty of the current economic environment, AXA Private Equity raised US$7bn in 2007, an increase of 45% from the previous year.
Do you think venture is making a comeback?
There will always be a mixed bag of views on the future of venture. While the recent decision by some investors to leave the market has highlighted its pitfalls, there is still very much a place for the asset class. There will always be good companies looking for early stage equity.
What of the mega funds?
At the beginning of last year, we saw at least one mega buyout being announced each week. While AXA Private Equity doesn’t manage a mega fund, our co-invest fund took minority stakes in a select few of those opportunities.
The decreased availability of debt required for such deals means that we are looking at a very different market. Given that mega funds are managed by top class and innovative teams however, they will undoubtedly find other investment opportunities. The discounted price of many assets on the market means that, even without as much leverage, there is the potential to generate attractive returns.
In the long run mega deals will continue to thrive. Large corporations will always require strong and strategic shareholders.
What is your focus for the year ahead?
Our goal is for AXA Private Equity to become a leading investor across all of its asset classes and in each of its target geographies. We believe that we are on track to achieve that goal.
In 2003, there were 50 people at AXA Private Equity, now there are 200. We are looking at how we can both manage that growth and have it continue, albeit at a slower pace.
Internationally, we expect that our Asian office will benefit from the soaring growth of the region and we have entered the US mid-market. In terms of deals, we will continue to participate in the buoyant mezzanine market. In addition, our recently closed secondary funds make us one of the largest secondary players worldwide, providing the means to cherry-pick opportunities in that sector. Finding new direct investments will also remain an active focus, while our team will support existing portfolio companies by providing capital increases, when necessary.
Whatever happens in the market, we will continue to help good entrepreneurs worldwide to achieve their goals, enabling us to deliver the best possible returns to our investors.
What issues do you think the private equity industry needs to be most wary about in the future?
The industry is gradually coming to the conclusion that financial engineering alone does not necessarily equate a good investment. Our goal is and always has been to combine business acumen and a network of contacts to help companies grow in ways that could not be achieved by financing alone – leveraged or otherwise.
The private equity industry needs to remember its original purpose, i.e. to deliver business growth which benefits employees, shareholders, local communities and, of course, investors.
In 1996 Dominique Senequier was hand-picked by AXA Group Chairman Claude Bebear to build AXA Private Equity, which is now among the largest private equity firms in the world.
Dominique began her career as an Insurance Commissioner at the French Ministry of Economy. From 1975 to 1977, she worked at US insurance companies in New York, before moving to the GAN Group in 1980, where she was in charge private equity investments. Dominique left the GAN Group in 1996 to create AXA Private Equity.
Dominique was one of the first women to graduate from the Ecole Polytechnique in 1972. She also holds a diploma of the French Centre for Actuarial Studies (Dauphine University) and a postgraduate in Monetary and Banking Economics (Sorbonne University).
Dominique Senequier is a member of the International Institute of Actuaries. She is the author of “L’Assurance No Fault”: Lessons Drawn from the American Experience.
AXA Private Equity
AXA Private Equity, a subsidiary of the AXA Group, manages US$22bn of assets and has a client-base of institutional investors from North America, Asia, Europe and the Middle East. The company has more than 200 employees working across six offices in Paris, Frankfurt, London, New York, Singapore, and Milan.
The business has a diversified investment approach spanning LBO, expansion capital, venture, co-investment, infrastructure, mezzanine, primary, early and secondary fund of funds. Through these vehicles, AXA Private Equity makes more than US$3bn commitments each year.