In This Issue
Oct 2009M&A Opportunities Available in France
By: Thierry Gibert
Strategic investors have great possibilities in France for chosen
acquisitions at reasonable prices. That said, investors must carefully
screen the market to find appropriate targets because the volume of M&A
transactions continues to decrease, according to the Thomson Reuters index.
Transactions totaled Euro 5.4 billion in Q1 2009, down 45% compared to 2008 and
far from the Euro 43.4 billion recorded in Q1 2007 and Euro 74.7 billion in Q1
One reason for such a decline is the credit crunch that has all but stopped leveraged transactions. Other factors include the hesitation of listed companies to divest assets for fear of sending a negative signal to the financial markets, and the current absence of short- to mid-term visibility remains an incentive to focus on improving operations rather than pursuing transactions.
Deals are also made difficult by the difference in valuation expectations between sellers and buyers, and money raised on the recovering French bond market is widely believed to be earmarked not for acquisitions but for finance debt reduction.
As a result of these and other concerns, the fall in valuation of unlisted mid-market companies goes unabated. According to the Argos Mid-Market Index, the 6.2 x EBITDA for H1 2009 has reached the lowest level since December 2004. One factor that explains the decline is that some of the sellers either cannot or do not wish to put off divestments and are thus willing to accept lower valuations.
There are, however, some opportunities in the French market, among them, troubled non-core subsidiaries sold to strategic investors. For example, the Belgian group Soenen GolfKarton acquired Papeterie du Doubs from the Otor Group, and the cosmetic group Yves Rocher sold two call centers to Group Data Base Factory.
Weakened family-owned enterprises in need of financial backing are also good
targets. The founder of the welding company LTM Industrie sold 80% of the
company to the German Bilfinger Berger, and the Danish pharmaceutical
manufacturer Lundbeck bought its supplier Elaiapharm, a toll manufacturer.
Additionally, young innovative companies owned by financial investors are willing to sell to strategic investors for lack of other exit strategies. The innovative medical device company Narval, for example, sold to the Australian group ResMed.
At the same time, some sectors are undergoing a complete restructuring. Forty percent of the bar-turning ("décolletage") French industry was controlled by international companies backed by financial investors. As a result, the economic crisis resulted in several divestments in a short time. Within a few weeks, for example, Franck & Pignard, owned by the US-based Autocam (controlled by Aurora Capital) was sold to the French Maike group; then Ebea was sold by the US-based Hilite International (controlled by Carreras, Kestner & Co) to the French Baud Industries.CDI has a long experience in assisting foreign groups entering the French market and can be instrumental in identifying proper targets in this fluid environment.
Author: Thierry Gibert