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French private equity industry puts transparency at the top of its agenda

The French private equity industry has put transparency at the top of its agenda to ensure it can build on its significant success of recent years in growing local investment activity. Xavier Moreno, President of the country's private equity association AFIC, told its annual conference that greater transparency was the key to attracting new investors to the asset class and retaining existing investors during difficult market conditions.

‘We need to be more and more transparent and I would like to highlight the point of transparency (at this conference). Newcomers to private equity have these concerns and many institutions are ready to commit but they need more information,' Moreno told a crowded audience of French private equity firms.

AFIC took the opportunity of its conference to publish a strong set of investment figures for 2002 that showed the French market seemingly resistant to the sharp slowdown experienced elsewhere in Europe and in the US.

Investment activity by AFIC members rose seven per cent to around E3.5bn, up from E3.3bn in 2001. The figure was even higher at E5.8bn if a handful of large investments by non-members, like US firm KKR, were included. 

Moreno said recent activity showed just how attractive the French market had become to domestic and foreign private equity investors over the last few years but he cautioned against complacency and said it was essential the industry maintained the highest standards through a difficult set of operating conditions.

Former EVCA President Edoardo Bugnone, echoed Moreno's sentiments, saying that the private equity industry would greatly benefit from the adoption of universal reporting and valuation standards. He urged the different industry groups in both Europe and the US to work together to achieve a common standard.

AFIC underlined its determination to be as conspicuous as possible in promoting transparency by publishing a revised set of valuation guidelines and, more significantly, unveiling a new statistical tool to improve the quality of investment data.

Gilles Mougenot, AFIC Vice President, launched a new online platform developed in conjunction with PricewaterhouseCoopers that will enable members to update deal information in real time. It means the association will no longer have to wait for quarterly, half-yearly, or annual surveys to update their information.

The tool will be the most sophisticated form of data collection used by any of Europe's private equity associations and, if successful, will mark a significant improvement in both the reliability and timeliness of industry data.

French Minister for Small and Medium-Sized Businesses Renaud Dutreil addressed the conference and pledged the government's support for the industry. He singled out two sources of frustration, the scarcity of domestic long-term capital and the rigidity of the country's labour market, but promised policy action to help France become ‘the new tiger in Europe.'

A panel of institutional investors endorsed the growing attraction of the French market. In particular, they said the local economy was now deep and diverse enough to provide a sustainable flow of high quality deals and was well resourced with good domestic teams. ‘There is a huge supply of human capital…France is the market with best potential in continental Europe,' said Rod Selkirk of UK fund manager Hermes.

He also played down concerns that there was an oversupply of capital now focusing on the French buy-out market. ‘I am a lot less concerned about the amount around for buy-outs. It is not the same issue as the oversupply of venture capital…Buy-out managers are pretty sensible,' he said.

Moreno closed the event by saying that 2002 had marked a turning point for the French private equity industry. ‘We have become mature,' he said. Future success now depended on the transparency and reliability of data, starting with investment activity but looking forward to a time when performance information would be more freely available. ‘The next thing will be the same kind of work for performance,' he said.

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