Why Private Capital Is an Agent of Recovery in France

French private capital funds invested €31bn in more than 2,300 companies last year. Their capital and know-how will prove vital as France emerges from the pandemic

France’s private equity industry supports about 8,300 companies, making it the second-largest center in Europe and the largest in the EU. It benefits from the vitality of the economic fabric in France, with a large pool of SMEs, a strong entrepreneurial culture, and a real capacity for innovation embodied by the technology sector. Despite the impact of the COVID crisis, private equity activity stayed strong in 2020 in preparation for the post-pandemic recovery. Navigating a way out of the COVID crisis will be crucial for all companies, many of which will have to accelerate their transformation to stay in the race. Those with support and capital from private equity funds will have a competitive advantage.

Strong Support for Businesses during the Crisis
In 2020, the 3,661 fund managers that are members of France Invest provided strong support to the French economy. They invested €31bn to finance more than 2,300 start-ups, SMEs, mid-caps, and infrastructure projects. They were also present to support them through the emergency and prepare for the recovery; more than half of the transactions were equity investments in start-ups, SMEs, and mid-caps. A total of €18bn was allocated to 2,027 companies, 80% of which are based in France.  

Although investment declined 8% from 2019, the amounts invested remained at a historically high level, despite the severity of movement restrictions in France. The number of companies supported remains well above the long-term average. The fact that 60% of investments in 2020 were reinvestments testifies to the strong support private equity funds provided to help portfolio companies get through the crisis.  

At the same time, French private equity players raised €30bn from institutional investors and individuals in 2020, a third of which was of international origin. Though down from €41bn raised in 2019, the amount is a respectable total given the almost global lockdown and the uncertainty weighing on the economy. Over the next five years, this finance will be deployed as equity (€24bn) and debt (€7.7bn) in companies and infrastructure projects, helping French companies grow, adapt, and take advantage of new markets and opportunities.  

Mobilization for a Rapid and Massive Recovery  
For the first time in its history, France Invest has joined a state-led recovery plan. In October 2020, the Minister of the Economy Bruno Le Maire launched the ‘Relance’ label, which will help direct the savings of the French people toward equity and quasi-equity funds and investments in companies to help them navigate the exit from the crisis. France Invest participated in the discussions led by the Directorate-General of the Treasury, which finally led to the definition of the Relance label. At the end of May 2021, 95 of the 174 funds labeled Relance were managed by companies that are members of France Invest.

France Invest and its members engaged with the public authorities to help develop proposals for solutions and mechanisms that will support companies through these difficult times, utilizing quasi-equity to strengthen their financial position without diluting their capital. These initiatives demonstrate the industry’s desire to play a key role in the recovery, boosting its visibility with public authorities and the wider corporate sector.

If private equity has always been an important pillar in the financing of French companies, today, in the context of recovery, it is an essential player. Companies urgently need equity. This is also an opportunity for our members to expand the French private equity market to family entrepreneurs, who have sometimes been reluctant to work with funds, and to create links and future opportunities for cooperation on projects.

Supporting Companies to Accelerate Their Transformation
In the rebound phase that we are now entering, companies will have to accelerate their transformation. First of all, we need to raise more capital to allow us to support more companies. We therefore want to allow French savings to enter the asset class – we want to make it easier to channel retirement and employee savings into private equity. Our ambition is to mobilize €10bn from savers over the next five years which can be used to benefit companies, regions, and employment via private equity.

In addition, we will provide companies with concrete support to help them implement ESG policies to comply with French and European regulatory obligations, which are intensifying. Private equity actors are aware they have a responsibility to help their holdings become more sustainable and be mindful of societal, biodiversity, and climate change issues. We have been present on these issues for 10 years, but we must now accelerate our efforts because there are nearly 10,000 companies that will need support as they move toward carbon neutrality in the coming years. More than a third (35%) of our members have already set carbon neutrality targets, and this will increase to 100% by 2030.

Finally, with regard to gender diversity, France Invest has set the ambitions with its Parity Charter, signed in 2020 by 80% of its members. We have already achieved encouraging initial results and we will now extend this Charter to social and cultural diversity. To make ourselves known and spread the entrepreneurial spirit among young people in middle and high schools, we have established a partnership with the association ‘100,000 Entrepreneurs’ and will mobilize our professional members to participate in this large-scale educational program. In addition, we have created of a board of directors of France Invest members that are under 35 years old to reflect on the challenges and the evolution of the profession.

Private equity must anticipate the upheavals that are coming. It has the ability and the experience to help drive a new economy in France.  

About Claire Chabrier
Claire Chabrier was elected Chair of France Invest on 15 June 2021. Claire has been active in private equity in leading financial institutions for 20 years. She is currently a Managing Partner of Amundi Private Equity Funds (PEF), which she joined in 2011.  

Created in 1984, France Invest currently has 359 active members and 171 associate members. France Invest promotes the growth of private equity among entrepreneurs, global savings managers, French and European public authorities, and opinion leaders. Its members play a major role in the growth and transformation of companies and in supporting the French economy.