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MARKET OVERVIEW

1.1 Market Definition and Structure

Turnaround funds, also known as turnaround capital funds, are gradually making a place for themselves in the French economic landscape with large-scale takeovers such as Doux and Sephora.

These funds invest in companies in poor health, often burdened by excessive debt or other internal problems. Their mission is then to "turn around" the situation by restructuring the target's activities and providing financial and human resources.

For a long time the market remained relatively confidential. Today there are only about 200 turnaround funds in France, while the number of bankruptcies is close to 50,000 each year.

Large firms have developed restructuring activities (KPMG, EY...) but do not invest directly in companies in difficulty. This role is most often assigned to private equity funds (Bridgepoint for example). The most important in France are Impala, Butler and Arcole Industries.

The regulatory environment remains very restrictive for turnaround funds and favours employees first and foremost. As the economy is in an expansion phase, the number of bankruptcies is decreasing, but there are still many opportunities for the funds thanks to their small number.

1.2 Restructuring in Europe affects millions of workers

There are many private equity funds in Europe, also known as private equity funds. These have significant funds that allow them to invest in LBOs (***) in companies that are doing more or less well, these are called buyout funds. Turnarounds are generally not their core business and are in fact relatively ...

1.3 Industry, the sector favoured by turnaround funds

Since ****, *,*** restructuring cases involving more than *** employees have been identified by the Group Eurofound in France. In the context of bankruptcies, closures and relocations, industry is the sector most affected by restructuring. This sector is particularly affected by competition from low-wage countries. The turnaround mission generally consists in restoring the competitiveness ...

DEMAND ANALYSIS

2.1 Business failures in France

The demand for turnaround funds is represented by the weakness of companies in the economy. This can be determined by two indicators: the number of bankruptcies and the evolution of employment in France.
During the phase of slowing economic growth, or even during the recession, opportunities for funds are multiplied. They ...

2.2 The preferred targets of turnaround funds

Targets for turnaround funds often share a number of characteristics:
A turnover of several hundreds or tens of millions of euros maximum An investment of a few hundred million euros maximum
In detail, the stocks chosen by turnaround funds vary according to the size of the fund and its investment strategy ...

MARKET STRUCTURE

3.1 The turnaround sector is still relatively confidential

According to the AFG (***) and turnaround capital funds. [***]

Source: ****
French turnaround funds are relatively few in number: only ** managers are listed by the AER (***) as investors. [***]

Competition is not necessarily fierce between the players in the sector since each fund chooses its targets also according to human criteria (***).
Large foreign funds, ...

3.2 The actors of the turnaround

Business turnarounds remain a particularly complex sector since it requires a very good understanding of the law and relevant technical skills among others. The AER provides an overview of all the players involved in the turnaround of a company.

Every actor has a role to play at some stage of the ...

ANALYSIS OF THE OFFER

4.1 The intervention of turnaround funds

The intervention of the turnaround funds always takes the form of a capital contribution that enables the company to take control of the business or at least to have decision-making power. This contribution also allows the company to orient its strategy and to start the restructuring process. Debt may also be ...

4.2 Exit or disinvestment procedures

When an investment fund (***) wishes to recoup the benefits of its investment after several years, several methods are possible. [***]
The IPO
The first is to float the company on the stock exchange as part of an IPO. However, this requires that the financial markets have a compartment for smaller companies.
In ...

4.3 Current status of the various collective proceedings

There are several collective procedures that can be envisaged by a company facing difficulties, some of them are amicable, others are collective and have recourse to legal proceedings.

Source: ****
Mutual agreement procedures
The use of an ad hoc mandate or conciliation allows the company to negotiate with creditors in order to ...

4.4 Digital is a key issue for turnarounds

Turnaround funds in France can now rely on digital to boost organic growth (***) of a company. [***]
Indeed, according to a study by the Capgemini Group, companies' use of new technologies (***) enables them to be **% more efficient than the average in their sector and are better valued, with an average premium of ...

REGULATION

5.1 Particularly developed regulations for companies in difficulty

Eurofound groups together certain rules that apply when a company is restructured. These rules are generally binding and come from the labour code. Indeed, priority is given to employment in France. The most important are the following:
Wage guarantee in the event of bankruptcy: regardless of the duration of their employment ...

5.2 The consequences of the PACTE law and the Restructuring and Insolvency Directive

The PACTE law, adopted on ** April ****, slightly modifies the procedures in the context of turnaround.
Within the framework of the receivership, the debtor can propose one or more receivers, which allows him to work in partnership with the same person who accompanied him during the safeguard. [***] Simplified judicial liquidation is now ...

POSITIONING OF THE PLAYERS

6.1 Segmentation

* funding provided by Alandia

  • H.I.G. Europe
  • H.I.G. Europe
  • Butler Capital Partners
  • FCDE
  • Alandia
  • Aryes

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