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Michel Paris: “The Stock Exchange is starting to show signs of the end of the cycle”

PAI Partners completes a fundraising of 5 billion euros, marking its return to the forefront on the market. Faced with the abundance of liquidity, its chairman Michel Paris is keeping a cool head and consolidating its strategy of acquisitions in Europe.

Michel Paris, the president of PAI Partners announces the raising of a seventh fund at 5 billion euros, after having received three times as many subscription requests.  “Raising a mega fund seemed to us not to be the best solution”, estimates the leader.

Several of your competitors have just raised mega funds in recent months, why are you limited to 5 billion euros?

That’s right, many players have taken advantage of the current abundance of cash to double the size of their new vintage. PAI could easily have imitated them and pushed back its lifting threshold beyond 7 billion euros. Demand reached 15 billion euros! But we voluntarily and very quickly set a maximum investment ticket, low enough for large international subscribers. This has enabled us to retain historical investors who have remained loyal in difficult times, and to attract new ones appearing among the benchmarks of private equity such as TRS, Lacera, Washington or PSP. This does not limit our firepower: we are open to co-investments from our underwriters who are the largest in the world market.

Is this a sign that you fear a cycle change?

PAI is the main and oldest player in this sector in continental Europe. This has advantages. We know from experience that our business is cyclical. Today valuations are high, which is ideal for selling. Last year, we returned 4 billion euros, or three times the stake, to our investors, with disposals such as Cerba, DomusVi, Xella and more recently ADB and Kiloutou. But the very favorable macroeconomic environment may not last. The stock market is also starting to show signs of the end of the cycle. Under these conditions, raising a mega fund did not seem to us to be the best solution, knowing that we can come back to the market at any time depending on our deployment vision.

Some of your competitors have taken the opportunity to diversify by entering new investment segments …

That is true ! We are not comparable to the large diversified American or European houses, which are developing on multiple strategies. These firms have a priority which is to grow their base of assets under management. Generating management fees is not our strategy. Our know-how is to transform our companies into portfolios, to build partnerships with large Groups (Nestlé, Banco Santander, etc.), to bring national champions to the international stage and to make them European or world leaders. We have an excellent track-record in our areas of expertise which remains one of our essential differences vis-à-vis our competitors.

No change of strategy on the horizon, therefore. PAI will remain invested in the sole business of large-scale LBOs in Europe?

We have been following the same strategy since the end of the 90s: being a pure LBO player in Europe with the most significant geographic coverage; that’s what sets us apart but makes us look like some of the biggest names in the industry such as Cinven, Advent, or CVC. We do not intend to make any acquisitions in the United States, although we have a very active office there to develop the companies in our portfolio.

Don’t expect us to invest in tech or infrastructure! We remain focused on our historical sectors.

Bottler Refresco and packaging specialist Albea, who are already world leaders in their respective industries, should take full advantage of this in the coming months. In addition, we want to remain focused on the four sectors in which we have a proven track record, namely consumer goods, services, healthcare and industry. It is thanks to this expertise that we have made Yoplait a world leader by associating it with its American partner General Mills; that we have created major players in services such as Spie or Atos; and that we are able today to develop a very successful joint venture with Nestlé.

This company, called Froneri, is the first joint venture with Private Equity funds for Nestlé. It generates more than 400 million euros of EBITDA. Clearly, don’t expect us to invest in tech or infrastructure! We remain focused on our historical sectors.

You have not recruited a digital manager dedicated to the digital transformation of your companies, unlike your competitors again. Isn’t that a gap?

We report less about it than our competitors, but digitization is obviously one of our priorities. Our group’s primary objective is to help our portfolio companies implement the most effective digital strategies. We don’t think this necessarily means hiring a CDO. We have developed clubs bringing together the managers of our participations on transversal themes (purchasing, HR, digital, ESG) to accelerate the sharing of experiences, but also to expose them to new solutions and practices. In this context, we recently brought together start-ups, digital experts and innovation specialists at Station F, for the benefit of our portfolio companies.

Funds increasingly target listed assets. You would have registered a mark of interest on Korian. Is it a strategic axis?

Some groups are very well valued on the stock market, others are in a downward phase. This can create opportunities and we do systematic market reviews. We have just completed the delisting of Refresco in the Netherlands for an enterprise value of 3.3 billion euros which is a good example of the opportunities that exist.