The Fund better perceive the risk of execution

In a year 2010 halftone, one of the highlights will undoubtedly remain the resumption of the activity of investment funds. They had generated nearly a quarter of the mergers and acquisitions in 2006, in Europe in the world, before almost completely from the market because of the crisis, lack of funding. They therefore made their return in 2010, although it is probably not as important than expected summer.

According to Dealogic data, volumes of transactions involving the purchase funds rose 84 on a year in the world. The France is not at rest. With close to 10 transactions of more than EUR 500 million, led by funds for the purchase or sale, it is one of the most active markets this year. The most emblematic operation is the resumption of the frozen food Picard by Lion Capital this summer, for EUR 1.5 billion.

The main engine of the recovery of capital investment has been the availability of funding, reopened for twelve to eighteen months for the Fund. The spark came from the capital markets, with the resumption of debt-to-high-performance ("high yield") emissions, which helped finance larger operations, such as Picard, when banks still remained on the reserve. Well paid for investors, "high yield" debt emissions also increased 58 in 2010 in the world, reaching record levels. "Debt"high yield"is interesting for everyone, said Jean Beunardeau, Deputy General Manager of HSBC France.". It opens with maturities longer than bank credit at a comparable price and is less restrictive in terms of documentation.

The crisis has however left in an industry accustomed to excess. Transactions are now with equity ratios easily reaching 50 of the value of the purchased asset, and therefore with much less debt than before the crisis. Valuation levels remained reasonable, with a few exceptions, and all assets found no taker. "In Europe, the multiple did not exceed 5-6 times the EBITDA, against 7.5 times levels before the crisis", says Jérôme Calvet, co-Chair of Nomura. Result, businesses came to compete with the funds to purchase, as in the surrender of Conforama, taken over by the South African distributor Steinhoff. "Companies are taking their revenge on the funds, notes Michael Nebot,"managing director"in Citi.". They have the cash and have access to the balance sheets of banks, even if they are also financed on the market.

Lack of "primary" operations

Another stigma of the crisis, the very low share of deals "primary", i.e. of assignments from industrialists and entrepreneurs. The bulk of the market in 2010 was composed of assets already under LBO, sold and bought several times by funds, so well known banks and investment teams. "These records should return in 2011 because valuations revert attractive," says Thierry silver, responsible for mergers & acquisitions for Société Générale.

More generally, the funds should occupy an increasing share of activity in 2011. "The funds have large amounts to invest, with deadlines in 2012-2013 that matches funds raised in 2006-2007," explains John Raby, "managing director" Goldman Sachs. Few specialists expect however to several billion operations carried out by consortium funds. "Life in the consortium is complicated with hindsight, continues Jean Raby. The Fund better perceive the risk of execution. They are used to manage corporations who control and it is difficult to argue its added value when it is 3 or 4.