Private Equity in France : how top level interim management can make all the difference in portfolio companies
Pierre van den Broek is the owner and President of NIM Europe, France’s leading interim management resourcing group. In this discussion with James Wheeler of PILOTpartners he gives his take on the French private equity market in general and explains how top level interim management can make all the difference in portfolio companies.
What is happening in the private equity marketplace in France ?
The private equity market has been hit by the global crisis in France pretty much as well as in the rest of Europe. These hard times have initiated new development and change strategies and forced investors to find new solutions to maintain value and invest their available funds.
2009 was mainly dedicated to the monitoring of portofolio companies at the height of the financial turmoil. As for 2010, we think that the decline in enterprise values and the growing number of opportunities in France will enable private equity funds to benefit in the coming months from a more favourable cycle. They have accumulated a considerable reserve of undrawn funds that they will have to invest in quite a short period of time. Besides, we are now entering a new cycle with a different way of doing deals: there will be less leverage and financial engineering and more operational value creation.
How will this affect the need for top skilled managers ?
The situation depicted above implies a strong need for better management skills. If businesses and investment funds are to grow with a stronger operational focus, they will have to hire the most competent executives in the field.
As for the French market, we know that a substantial proportion of the funds raised before the crisis is still looking for promising businesses. Our clients in the private equity sector, mostly small and mid cap funds, all experience the same issue: they have cash but at the same time huge difficulties to identify the right targets. As some of them look beyond French borders to get at those ventures, others seek to improve their operational grip on their companies. To achieve those two objectives, they need highly qualified human capital, whether in the investment team itself or in their portfolio companies.
How does NIM help in this changing environment ?
At NIM, we have been working in the French market for almost ten years now and are one of the few firms that have successfully introduced the concept of interim management (« management de transition ») in the sector. In addition to this long standing experience, we have always been well connected to small and mid-cap investment funds, providing them with skilled managers for their holdings (in various sectors such as engineering, pharmaceuticals, business services, etc) and investment managers for their teams.
NIM also helps to maintain cost effectiveness. By injecting specialist skills for a specific project over an agreed timescale, employers can improve performance with minimal risk. The strategic use of interim management or ‘transition’ executives enables an organisation to seize opportunities or to address specific issues when they arise. Sensibly qualified for the job in hand, these senior executives and directors have a proven track record, which enables them to be effective from day one.
What strikes you most about private equity in France right now ?
I can’t help but say that we are often surprised by the distance between private equity funds and their portfolio companies. We sense that many of the funds’ directors don’t really get out intos the field to inspect the situation for themselves. Their concerns seem to be more financial than operational. Hopefully things are changing for the better but I recently followed the failure of a private equity sustained company. It really seemed like the more the firm went downhill the less the investors knew how to deal with it ; they were panic-stricken. Actually, they could at least have tried to change the management but, contrary to my advice, did not dare to do so.
I also think that, unlike Anglo-Saxon funds, many medium-sized French funds are almost exclusively focused on the French market, though they would like to expand internationally. Last month we were proud to help one of our clients recruit one German investment director whose task is to identify targets and lead operations focusing on the German market. This is also a good way to diversify the investment teams which are in strong need of complementary skills.
One last unfortunate point that I have observed many times. Private equity houses like to invest in family businesses with strong and reliable management teams. But there are too many bankruptcies in the wake of the founder’s departure. Finding top level management succession is precisely our mission. I strongly believe in the value inherent in board level interim management: our goal is to provide funds with aligned manager-investors, This can be on either an interim or permanent basis, or indeed one leading to the other Our clients can depend on us providing, for example, an interim CEO where a turnaround is required over time or a CEO who is willing to co-invest. These are people whose abilities reach far beyond the financial and functional features of a deal, people who have commitment and skills at the same time.
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Pierre van den Broek graduated from the ESME Sudria (Special School for Mechanics and Electricity) in 1982, before joining Framatome in 1985. Over seven years he dedicated himself to setting up nuclear power plants, most notably in the People's Republic of China. In 1992, after a spell managing the French Institute of Management, he joined Altran to develop their innovation consulting practice, at first in France. He then started and developed subsidiaries for Altran in Portugal and Brazil. In 2005, he bought NIM, a French Interim Management practice. Pierre, 51, is an avid watersports fan and participated in the 2007 Transat Jacques Vabre on a 50’ trimaran prototype.
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Le Figaro 21 Septembre 2009
20 Minutes 17Septembre 2009
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