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5 minutes with… Dominique Gaillard

by The Drawdown 21 June 2018

The latest instalment of our ‘5 minutes with…’ series; a brief catch-up with private equity operational professionals and service providers to learn about their work and views on current trends.

Dominique Gaillard, for years the executive chair of Ardian France, was unanimously elected as head of trade body France Invest on 14 June. He replaced Olivier Millet, head of Eurazeo PME, who himself took over from Céréa Partenaire CEO Michel Chabanel in June 2016.

The succession comes as French private equity solidifies its comeback. From a relatively recovered macro environment to record-breaking fundraising figures, the national industry Gaillard will be steering is triggering more positive headlines than those seen in the post-crisis years.

Competition is, as The Drawdown found out during a recent Paris trip, the price local players are paying for their country’s fresh popularity surge. GPs met by this publication all hailed France’s resurgence under Macron but acknowledged that staying ahead in an in-demand market will demand a refining of operations.

Ahead of our broader investigation into French operations, set to be published over the coming weeks, here follows our conversation with Gaillard. An engineer by training, he shares plans to build tech know-how and why consolidation – an as of late very French phenomenon – could be an operational asset.

The Drawdown (TDD): Your election comes at a momentous time for French private equity, with strong growth on all fronts but also rising competition from foreign players. How to thrive in a fast-overheating market?

Dominique Gaillard (DG): It is definitely an interesting moment for France. One of my motivations as the new chair of France Invest is knowing the initiatives I’m planning will come out at a more positive time, politically and socially speaking, than was the case a few years back. So, I want to push 18 concrete initiatives that will boost the development of French private equity.

Competition, it’s true, has been strong for a few years now. The abundance of both equity and debt financing is pushing up deal prices and the valuation of start-ups and technology companies in the venture capital segment. The response to competition will be to work, really in advance of deal negotiations, on how to create value alongside the management teams of the companies identified as good targets. As the head of France Invest, I think most of our members have the same belief in this prospective work: to compensate for higher entry prices, let’s reflect on value creation strategies as early as we can.

TDD: Could technology hold the keys for French GPs to stay ahead in a competitive landscape and how will France Invest help them unlock that potential?

DG: Digitalisation truly is the new wave of transformation for the industry. It is something that critically impacts our portfolio companies but also ourselves. Technology could help us all make a difference with interactions with our own LPs, our work to identify interesting acquisition targets. The importance of innovation is something most in French private equity, particularly larger players, understand and appreciate but it still needs to be developed and taken further. France is a technology country with high potential. Our job is to cross-fertilise this asset class with the needs of more established companies to help them in their transformation programmes.

As the head of France Invest, I’ve asked to set up training programs around digital challenges, to be delivered through our Académie France Invest scheme. Bigger houses like us at Ardian have already worked to train our own employees but for smaller firms with a five- or six-strong workforce, having the time and resources to arrange this internally can be difficult. I want the association to play an active role, to make sure training around digitalisation becomes accessible to all in the market. There is here a key driver to accelerate France economic growth.

More globally, I really want to try and help first-time funds. I’ve been glad to see how the challenges have become less steep for them over the past two to three years in France but the goal is to take it further. France Invest will make things easier for them, helping create a richer, more diversified private equity ecosystem in the process.

TDD: Over the past few years, consolidation has become a recurring theme in French private equity. How will all the mergers and acquisitions impact the national ecosystem?

DG: I’m actually also a proponent of consolidation and will try to promote moves in this direction. The trend of consolidation is underway in France, but the goal is to accelerate, to have more French funds with an international reach. To me, internally the benefits are many for GPs. Multi-strategy firms have an easier time attracting and retaining talent. For younger people joining the industry today, it is motivating to know they will be able to move from strategy to strategy, rather than being required to spend decades in the LBO or venture space only.

The perks can extend to the external front. French firms, particularly smaller names, have sometimes struggled to raise money from outside France. Being multi-strategy multiplies their ability to attract clients and grow larger. Growth, in return, will boost their internal capabilities and resources to meet regulatory challenges. From KYC to AML, the burden increases every year and demands a strategic refocus.

TDD: From outside, Macron is typically perceived as a finance-friendly politician but what has been the administration’s behind-the-scenes view on private equity so far?

DG: From our contacts so far, we know they’re extremely favourable to the role private equity can play to promote growth and technological transformation. In terms of the number of intermediate-sized enterprises known as ETI, France today still falls behind others like Germany. I’d be happy to see our industry help grow businesses and generate an ETI ecosystem; our priority now is to convince family owners that our interests are aligned, that thanks to our capital they can grow internationally and help shape the country of tomorrow. And again, I know that is something Macron’s administration is very interested in, because he knows we can be a catalyst of growth.

A legislative proposal France is currently debating could help improve our image among employees and business owners. The “Pacte” act that will be considered by MPs this autumn would, among other things, help make profit-sharing with employees easier and more fiscally attractive. Ardian has put this in practice for almost 10 years now but I am now hopeful the law will make it easier for our fellow GPs to follow us. We could all help make private equity more acceptable as a responsible, bring down some of the barriers, particularly with employees and their committees.

TDD: Uncertainty around Brexit has prompted questions around whether UK financial players, GPs included, should look to build their presence somewhere else in the EU. Could Paris be a good base?

DG: I am positive it could and sincerely welcome all firms contemplating a move to France. I think for the coming years, the country will be a great place to conduct private equity business so it is the moment to consider relocating. From France Invest, we will work to make sure new arrivals enjoy a stable fiscal and regulatory environment that is as favourable as possible.

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