Eurazeo continues to conduct its value creation strategy, primarily based on investing in companies, either listed or unlisted, and participating actively in their management as a professional and responsible long-term shareholder.
Eurazeo has also invested in predominantly real estate assets, such as in ANF, which continues to focus on expanding and adding value to its portfolio.
At the end of 2008, over 75% of Eurazeo’s assets were comprised of investments in companies in which it is either a majority or key shareholder.
In a "regular" year, Eurazeo analyzes about 50 to 100 projects before it finally closes one to three deals. 62 projects were analyzed in 2007 and only one was realized in France, Elis. In 2008, the collapse of the debt market and the "effects of the financial and economic crisis" put a halt to activity in the Private Equity markets; there were fewer quality opportunities at reasonable prices. Eurazeo studied 12 new projects and closed one deal: raising its equity stake in Accor to 10% of Accor's capital.
The deals Eurazeo evaluates might involve the spin-off of non-strategic assets from large corporations, the backing of family-owned companies, secondary buyouts, taking companies private or the purchase of significant stakes in large listed companies.
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Philippe Audouin, Chief Financial Officer
"Resulting from a conservative financial policy, tailored to our activity, Eurazeo has a robust financial structure and the resources to seize opportunities if necessary, or to support existing investments".
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Strict investment criteria |
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Eurazeo favors taking large equity interests or stakes that give it the ability to influence management regarding major decisions in terms of strategy, targeted or transformational investments.
Eurazeo places special emphasis on analyzing the investment criteria below.
- management quality,
- high barriers to entry,
- profitability,
- recurring cash flows.
Eurazeo primarily focuses on medium-sized or large companies, with values in excess of €300 million. In the current market conditions, Eurazeo’s equity stake could start at €100 million for future investments.
Eurazeo is very sensitive to risks, which it seeks to limit as much as possible on behalf of its shareholders. In operational terms, this conservative policy leads primarily to the diversification of its assets - by investing in sectors as diverse as the hospitality industry, car rental, the distribution of electrical equipment or car park management - geographical proximity with companies as well as regular, close contact with management. In certain cases, projects have been excluded based on environmental criteria. Furthermore, with only rare exceptions, Eurazeo limits each investment to less than 10 to 15% of its net asset value and has chosen to avoid structural debt at the Eurazeo level.
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Virginie Morgon, Director of Investments
"Our investment in Accor is in line with our investment criteria. We recognize the quality of Accor’s management. Its global network and powerful brands are a genuine barrier to entry.
The budget hotel industry continues to prove its capacity to generate profitability.
Exposing our Group to two business areas that have proven particularly resilient in a harsh economic period will guarantee recurring cash flows. Furthermore, we are convinced that the Group has a strong value creation potential in the medium term".
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A value-creating business... |
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For Eurazeo, investing is a business in which human capital is essential. Eurazeo has built a team of recognized professionals and developed the skills set in order to optimize its investment decisions and monitoring strategy.
Indeed, Eurazeo’s contribution is not limited to mere financial resources. The group contributes a genuine business development expertise: Eurazeo has a dynamic vision of its assets.
Today, the Eurazeo team of twenty professionals handle the operational tracking of investments by getting involved with the companies, and their managers, on several fronts:
- Defining ambitions for the company,
- Preparing a medium-term strategy,
- Validating the short-term (budgets) or medium-term (investment plans) objectives arising from this strategy,
- Determining the main operational guidelines with the executives,
- Assisting the company by providing it with our expertise in financial analysis, negotiation of financing, target company acquisition procedures or analysis of financial or legal risks, in order to boost its development capacity by optimizing its resources, and for certain companies, becoming even more autonomous in a change of status linked to departure from a group (such as Europcar) or to a change of size (i.e. B&B Hotels)
- Supervise the progress of numerous value-creating projects initiated during our tenure as shareholder, either at the beginning following in-depth analysis carried out prior to the acquisition, or later when new market conditions appear: new commercial initiatives, streamlining the practices of the sales forces, reorganizing retail networks, optimizing cash flow, and integrating acquisitions, etc.
Specifically, this monitoring is organized around regular meetings between the management teams of the companies and Eurazeo teams.
Strategic policies are freely discussed with the managers. The goal is to assist the management team, not replace it, and to allow it to grow the company, backed by a stable, professional and responsible shareholder.
Furthermore, the investment team meets every week to review each of the investments, regardless of their progress status, and share experiences and specific knowledge acquired in each equity stake, to allow every one to benefit from the acquired knowledge.
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Luis Marini-Portugal, Director of Investments
"Our initial due diligence on Rexel revealed three new areas of value creation.
First, in a highly-fragmented global market, we relaunched Rexel’s consolidation strategy with both bolt-on acquisitions and transformational transactions such as GE Supply and Hagemeyer. We also moved into higher gear and supported organic growth initiatives such as own brands, global key accounts and energy efficiency solutions, among others.
Finally cash flow culture was made stronger".
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… that requires the ability to anticipate and to adapt |
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Since the second half of 2008, and more specifically since the beginning of 2009, Eurazeo has assisted the management teams of companies in an effort to anticipate, to take the right steps to tackle the global downturn. Each of our companies worked on conservative budgets for 2009 and developed stress tests to evaluate their financial strength. As their long-term structured financing provides them with the sufficient leeway to handle their covenants, when they have any, the Group’s companies will be able to work towards the goal of bolstering their positions through higher market share and limited decline in profitability. Some of them can even consider achieving higher revenues and profitability because the downturn has had little or no impact on them due to their strong presence in resilient market segments.
In a more difficult environment, Eurazeo provides both operational and financial support as an active and responsible shareholder. Accordingly, Eurazeo has pledged to help B&B to finance part of the required investments to build new hotels. It may also provide financial assistance, if necessary, to other companies in its portfolio.
Eurazeo can hold on to its equity stakes for as long as it considers relevant and necessary (unlike an investment fund which has to comply with a statutory limitation for its holding period) and can therefore provide long-term support to the companies in which it invests.
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Gilbert Saada, Director of Investments
"Thanks to manufacturer buyback commitments covering a large part of its vehicle fleet, Europcar has succeeded in quickly adapting to more difficult market conditions while maintaining a service level, a utilization rate of its fleet, and prices tailored to the expectations of its customers".
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