Summary of our market study

The turnaround market, particularly pivotal in times of economic difficulty, has undergone a significant evolution due to the COVID-19 pandemic. While bankruptcies were expected to rise, France saw a record drop in business failures, with just 31,000 in 2020. This unusual trend can be explained by the substantial public aid granted to companies during the crisis.

The turnaround industry remains relatively niche, characterized by a handful of major players such as H.I.G Europe, Butler Capital Partners, and smaller funds like Alandia. The industrial, information/communication and retail sectors remain predominant, accounting for 65% of turnaround activity between 2016-2021.

Expansion-related turnarounds make up 55% of interventions, while internal restructuring and bankruptcies follow with 30% and 10%, respectively.

While the industry practices caution, the unexpected drop in business failures paints an atypical picture of the market, with many companies temporarily protected by pandemic-related financial support.

Trends in the French turnaround market

The French turnaround market has experienced a unique phase, particularly influenced by the recent global pandemic.

While demand for turnaround funds is traditionally linked to economic downturns and rising corporate bankruptcies, the expected rise in corporate bankruptcies did not materialize in 2020 and 2021 due to significant government intervention.

This unexpected development is the direct result of the substantial financial support provided by the government to companies struggling to overcome the COVID-19 crisis. Indeed, this period saw the lowest number of company bankruptcies in France over the last three decades.

The construction, retail, repair and automotive sectors are home to a large number of businesses that could be taken over.

It is reasonable to assume that, once government aid is withdrawn, there could be an influx of distressed businesses onto the market.

With over 600,000 bankruptcies between 2010 and August 2021, there could be a latent pool of businesses for es recovery funds.

Key players in the French turnaround fund landscape

The French turnaround fund market remains a niche compared to more traditional investment sectors.

Here are a few players who have attracted attention in the turnaround market:

  • Impala is a French turnaround fund that has forged a formidable reputation by intervening in scenarios where companies are facing difficult tides.
  • Butler Partners Recognized in the turnaround field.
  • Arcole Industries
  • FCDE (Fonds de Consolidation et de Développement des Entreprises) FCDE invests in small and medium-sized businesses that are on the brink of collapse, but show potential for takeover and growth.
  • Alandia is a modest-sized player,
  • Aryes specializes in supporting B2B companies
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Summary and extracts

1 Market overview

1.1 Market definition and structure

Turnaround funds, also known as capital turnaround funds, are gradually carving out a place for themselves on the French economic landscape , with large-scale takeovers such as Casino, or Orpéa, whose board of directors was reshuffled after its share price fell by 99.3%.

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, providing financial and human resources.

For a long time, the market remained relatively confidential, and was largely outclassed by other international players, notably American. Today, there are only around 200 turnaround funds in France, despite the fact that the number of bankruptcies is close to 55,000 every year - a figure that is currently rising.

Some large firms have developed restructuring activities (KPMG, EY...), but do not invest directly in distressed companies. This role is usually played by private equity funds (Bridgepoint, for example). The largest private equity funds in France are Impala, Butler and Arcole Industries.

The regulatory environment remains highly restrictive for turnaround funds, and favors employees above all else.s, particularly in view of the current climate of rising interest rates following a period of pandemic EMP and the continued existence of "zombie companies".

1.2 Restructuring in Europe concerns millions of workers

There are many private equity funds in Europe. These funds have substantial resources at their disposal, enabling them to invest in LBOs (***) in companies that are doing more or less well. Turnaround is generally not their core business, and is therefore relatively neglected. Acquisitions tend to be made in companies with ...

1.3 IN France, industry is the preferred sector for turnaround funds

Number of job losses (***) during restructuring of ailing companies France, **** - **** Source: ****

Since ****, Eurofound has recorded *,*** restructuring cases involving more than *** employees in France. In the context of bankruptcies, closures and relocations, industry is the sector most affected by restructuring. This sector is particularly hard hit by competition from low-wage countries. ...

2 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 employment trends in France.

During a slowdown in economic growth, or even during a recession, opportunities multiply for the funds. They choose targets whose ...

2.2 The preferred targets of turnaround funds

The targets of turnaround funds often share a number of characteristics:

Sales of several tens of millions of euros Investments of up to a few tens of millions of euros

In detail, the values chosen by turnaround funds vary according to the size of the fund and its investment strategy (***).

Source: ...

2.3 The impact of the pandemic on the turnaround market

The pandemic has had a considerable impact on the turnaround market. The succession of confinements and restrictive measures suggested that we would see a record number of bankruptcies in **** and ****. Records were indeed reached, but not those expected. In fact, in **** and ****, France saw fewer business failures than in the previous ...

3 Market structure

3.1 Value chain

Company turnaround remains a particularly complex sector, requiring a very good understanding of the law and relevant technical skills among other things. The AER provides an overview of all the players involved in a company turnaround.

During a turnaround or restructuring, the process involves several key players, each playing a distinct ...

3.2 The turnaround sector is still relatively confidential

Breakdown of capital raised by private equity type France, ****, as % of total Source: ****

Despite the sharp increase in the number of restructurings during ****, the selected data are from ****, since since ****, turnaround capital has been included in buyout capital.

In ****, the breakdown of capital raised in private equity in France shows a ...

3.3 The turnaround's favorite sectors

Number of turnarounds by business sector France, ****-**** Source: ****

As explained in the demand section, turnaround funds primarily target companies in difficulty, and therefore have preferred sectors.Manufacturing is the first sector targeted, followed by information/communication and retail. Between them, these three sectors account for **% of turnarounds over the last ...

4 Offer analysis

4.1 Turnaround funds

Turnaround funds always make a capital contribution that enables them to take control of the company, or at least to have decision-making power. This contribution also enables the company to steer its strategy and initiate the restructuring process. Sometimes, debt is added to the investment to enable the turnaround fund to ...

4.2 Exit or divestment procedures

When an investment fund (***) wishes to recover the profits from its investment after several years, there are several possible methods. [***]

Initial public offering

The first is to float the company on the stock market as part of an IPO. This presupposes, however, that the financial markets have a suitable compartment for ...

4.3 Current status of insolvency proceedings

There are a number of collective procedures that can be envisaged by a company facing difficulties. Some are amicable, while others are collective and involve legal action.

Source: ****

Amicable procedures

Recourse to an ad hoc mandate or conciliation enables the company to negotiate with creditors to reach an agreement on repayment ...

4.4 Digital is key to turnaround

Turnaround funds in France can now rely on digital technology to boost a company's organic growth. [***]

Indeed, according to a study by the Capgemini Group, companies' use of new technologies (***) enables them to perform **% better than the average for their sector , and are better valued, by an average premium of **%.

A ...

4.5 Supply impacted by rising interest rates

The upsurge in restructuring, amplified by the rise in interest rates, is clearly evident in Groupe Casino's setbacks. Its financial vulnerability, imprudent international strategy and lack of modernization led to speculative debt that was bearable at low rates. Abundant money favored poorly performing companies, turning them into "zombies". Rising interest rates ...

5 Regulations

5.1 Particularly developed regulations for companies in difficulty

Eurofound groups together a number of rules that apply when restructuring a company. These rules are generally restrictive and derive from the French Labor Code. Indeed, priority is given to employment in France. The most important are as follows:

Guaranteed wages in the event of bankruptcy : whatever the duration of their ...

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

The PACTE law, adopted on April **, ****, slightly modifies procedures in the context of turnaround.

In the context of receivership, the debtor may propose one or more receivers, enabling him to work in partnership with the same person who accompanied him during the safeguard. [***] Simplified judicial liquidation is now compulsory for companies ...

6 Positioning the players

6.1 Segmentation

* financing provided by Alandia

  • H.I.G. Europe
  • Butler Capital Partners
  • FCDE
  • Aryes
  • Alandia Industries
  • Andera Partners
  • Ardian
  • EIM Capital
  • Excelrise Investment
  • Siparex
  • Hivest Capital
  • Impala Holding
  • Open Gate Capital
  • Prudentia Capital
  • Renaissance Capital
  • UI Investment

List of charts presented in this market study

  • Number of cases of job cuts or creations (over 100) during company restructuring operations
  • Number of turnarounds in Europe
  • Number of insolvencies by company size
  • Total business failures over 12 months
  • Breakdown of capital raised by private equity type
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Latest news

Ardian the center of attention in private equity - 18/01/2024
  • Ardian was launched in 1996 with 25 million francs, backed by AXA, Crédit Mutuel and the Hermès group.
  • Today, Ardian manages $160 billion in assets from every continent.
  • Ardian was valued at around 6.8 billion euros at the time of its legal reorganization in 2022.
  • Global asset management giant BlackRock has announced that it will acquire Suez shareholder GIP, an infrastructure fund, for $12.5 billion (€11.5 billion).
  • European heavyweight CVC manages assets worth 188 billion euros.
Private equity: Ardian believes it is equipped to emerge from the crisis - 12/12/2023
  • Ardian is more than 50% owned by its teams, Crédit Mutuel, Hermès and AXA.
  • Ardian ranks sixth worldwide in the investment sector, with 151 billion euros in assets under management.
  • Ardian has raised 45 billion euros over the past two years.
  • Ardian acquired the Dutch company Attero, a specialist in waste management and renewable electricity generation.
  • Ardian postponed its planned IPO due to market volatility.
Ardian invests 20 billion in C.I. funds. - 26/06/2023
  • Ardian has raised over $20 billion for a secondary fund dedicated to buying back shares in private equity funds.
  • Ardian aims to raise a total of $25 billion for this fund.
  • Abu Dhabi's sovereign wealth fund (ADIA) has invested $6 billion in Ardian's fund.
  • Ardian also manages Mubadala Capital, the asset management arm of the Abu Dhabi sovereign wealth fund.
Siparex staff - 15/06/2023
  • Siparex manages assets worth 3.5 billion euros.
  • The group has six offices in France, four in Europe and partnerships in Tunisia and Canada.
Portrait of Andera Partners - 17/10/2022
  • Andera Partners celebrates its 20th anniversary in 2022.
  • Founded in 2002 with a dozen people, it now has almost a hundred employees.
  • In 2002, they managed just under 2 billion euros in assets under management. These assets have almost doubled since then, reaching 3.6 billion euros in 2022.
  • Andera Partners is 100% owned by its teams.
  • The fund targets companies with sales of between €50 and €500 million, with investments ranging from €25 to €100 million.
  • Often acts as the first financial shareholder for the companies in which it invests.
  • In 2021, the exit of Skill & You, the French leader in e-learning, was carried out, with Andera's shares sold.
  • Andera Partners recently participated in the third round of financing for ImCheck Therapeutics, a French biotech developing a treatment for cancer. This fundraising amounted to 96 million euros.
  • Andera Partners is currently in the process of raising a new fund, aiming for 200 million euros.

Companies quoted in this study

This study contains a complete overview of the companies in the market, with the latest figures and news for each company. :

H.I.G. Europe
Butler Capital Partners
FCDE
Aryes
Alandia Industries
Andera Partners
Ardian
EIM Capital
Excelrise Investment
Siparex
Hivest Capital
Impala Holding

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