Strengths of a pan-European private equity platform for small cap investments
In the current low interest rate environment, institutional investors are increasing their investment activity in the private equity asset class. At the same time, we see a trend for investors to focus on selected private equity companies. As a “one-stop-shop” with a wide range of alternative asset classes, Ardian benefits from this development.
In our experience, a strong and long-term track record in particular is one of the most important success criteria for successful fundraising. Ardian has been active in the small cap segment since 2002. Since then, Ardian has invested more than € 445 million in 33 companies and supported them in their international growth strategies. Two thirds of these companies have already realized acquisitions with Ardian’s support. This is also reflected in the successful development of our funds and the success of our fundraising: Around 80 percent of the capital commitments for the Expansion III Fund came from existing investors.
We are looking for companies where we can bring the strengths of the pan-European Ardian platform with teams and networks in all relevant international markets. We are therefore on the lookout in particular for companies that already generate a high proportion of their sales abroad or have high internationalization potential and want to drive forward their internationalization with a strong partner.
A good example of this is the French company Micropross, the most recent of the four investments already made from the new Expansion III. Micropross tests smart cards and develops Near Field Communication (NFC) technology for a variety of technology companies, some of them large international companies. The company generates 80% of its sales outside France, and wants to accelerate its internationalization together with us. Together with the French Ardian Expansion Team, we are currently exploring the German market for add-on acquisitions.
We definitely see attractive opportunities for deals and exits in the current market environment. In this respect, our new fund is certainly at the upper end of the small cap segment, which is heavily courted by specialized local investors, family offices with an appetite for direct investments, as well as international investors who are expanding their deal sizes downwards. Our strength here is that with our local teams in the three markets, we have an extensive network available to generate deals on a proprietary basis. In addition, we have a conservative financing structure with maximum leverage of 50% and a focus on value creation through operational performance and accelerating the international growth of our portfolio companies.
Geographically, the investment focus of our Expansion III fund is approximately 50% in France, 30% in German-speaking countries and 20–30% in Italy. However, this distribution is not set in stone; we will invest where there are attractive opportunities. In terms of company size, we aim to acquire majority stakes in companies with an enterprise value of up to €150 million. In the case of minority shareholdings, we participate in companies with an enterprise value of up to €500 million. We participate with equity of around 20 and 50 million euros per transaction. Depending on the transaction structure, co-investments by institutional investors may also be made.
We do not have a specific industry focus, but have a wealth of experience in Healthcare and Pharma, Consumer Goods, Business Services, and Industrials. A good quarter of the newly launched fund has already been invested in four European companies, including frozen finger food and snack specialist frostkrone. In the German-speaking region, we are planning another 4–5 deals from the new fund, including at least one deal in 2014.