Roux Capital Private Equity Primary & Secondary Advisory Page 1/15

Private Equity Primary & Secondary Advisory

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Roux Capital 103, rue de Grenelle 75007 Paris, France

+33 1 40 56 94 61 francois.roux@rouxcapital.com

www.rouxcapital.com

 

 

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Disclaimer

This document is confidential, is for informational purposes only and is intended solely for the person to whom it is delivered. It may not be reproduced, photocopied, passed on or disclosed to any other person without the express written consent of Roux Capital. This document is not an offer to sell or buy or an invitation to invest or divest, or the basis for any contact for the purchase or sale of any investment. In particular, it does not constitute an offer or solicitation in any jurisdiction where it is unlawful or where the person making the offer or solicitation is not qualified to do so or the recipient may not lawfully receive any such offer or solicitation.

The information and any opinions contained herein have been obtained from sources that are believed to be reliable, but their accuracy cannot be guaranteed. No responsibility can be accepted for any consequential loss from this information. Prospective investors should rely only on the information contained in a prospectus or information memorandum material when considering the purchase of an investment. Investors contemplating the sale of an investment should only rely on the information or reporting material issued by the entity managing the investment.

Private Equity is an illiquid investment class and there is no guarantee that investments can be sold at any satisfactory valuation levels. The value of any investments and their return can decrease as well as increase. Past performance of any investment or group of investments or asset class is not necessarily indicative of future performance.

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Table of contents

1. About 2. Fund placement 2.1. Fundraising 2.2. Approach 3. Secondary transfers 3.1. Liquidity 3.2. Solutions 3.3. Approach 4. Restructuring 4.1. Solutions 5. Profile 5.1. Media 5.2. Experience 5.3. Principles 5.4. Select us 6. Contact us

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1. About

Roux Capital is an independent execution-driven advisor exclusively focused on Private Equity primary and secondary assignments in Europe.

We cover all types of funds globally in buyouts, infrastructure, real assets, real estate, mezzanine and private debt. We can reach most public and private pension funds, insurance companies, family offices, corporate investors, banks and funds of funds in Europe.

n Fund placement

We act as placement agent for a select number of Private Equity funds seeking to deepen their investor relationships in Europe.

n Secondary transfers

We manage secondary transactions for investors requiring liquidity for their limited partnership interests.

n Restructuring

We assist fund managers as they restructure their existing investors base and fund terms.

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2.1. Fund placement - Fundraising

In Private Equity fund placement, we manage the whole fundraising process and enable our clients to monitor and influence all aspects of it.

n Investor base

We have developed an extensive global network of the most active Private Equity investors in Europe and maintain close relationships with European mid-sized pension funds, insurance companies, wealth managers, family offices and corporates. We can leverage our network selectively to help certain fund managers raise their next fund efficiently. We can organise well-targeted and focused fundraising efforts, as well as large-scale marketing approaches. We possess the appropriate ground level market intelligence and operating flexibility to help fund managers define the fundraising process that best suits their needs and execute it. n Mission scope

n Fundraising outlook

Sophisticated investors recognise the long-term nature of the asset class and still view it as an integral part of their overall investment portfolios. However, most investors are increasingly selective. All fund managers are competing more fiercely for capital, regardless of their existing investor base, financial performance, stability and reputation. They must deploy more IR efforts and reach beyond incumbent investors. That’s where Roux Capital think they can best help: by enriching fund managers’ existing investors base.

Preparation

Conduct thorough due diligence Prepare placement documentation Populate data room Define appropriate reporting format Pre-marketing

Position investment opportunity Identify main market challenges Define fundraising process

Marketing

Pre-qualify investors Make introductions, organize meetings Report investor feedback Provide on-going market intelligence Legal documentation

Identify best practices Assist in negotiations with investors Liaise with legal counsels Enable prompt closing

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2.2. Fund placement - Approach

In their relationships with investors, fund managers must acknowledge the unique features of the asset class: performance dispersion and performance persistence.

n Private vs public

Private Equity continues to provide a larger return opportunity than traditional asset classes. It remains well placed to take advantage of market inefficiencies and of opportunities materialising ahead of public markets. Interest alignment is better organised than in publicly traded companies, and time horizon is more serene to implement rewarding long-term strategies.

However, Private Equity is illiquid and brings little diversification to an existing public equity exposure. It would be useless if it did not possess, of all asset classes, both the highest performance dispersion and the highest performance persistence.

In order to take advantage of these two unique features, sophisticated investors pay increasingly attention to what makes Private Equity a unique asset class: • they use the asset class as a return enhancer, not a risk diversifier • they consider past performance as a reliable predictor of future performance and pay meticulous attention to quantitative issues • they have a bottom up approach, not a top down one.

n Implications

For these reasons, we encourage fund managers to demonstrate past performance and distribution capacity more acutely than in the past: • how much has been effectively distributed to date and how much is expected during the course of the fundraising? • how much financial and operational restructuring is required on unrealised portfolios? • to what extent can the fund manager keep executing its strategy and deliver corresponding performance?

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3.1. Secondary transfers - Liquidity

We believe secondary sellers can extract the highest value for their funds if they can access the right buyers across the board.

n Buyers universe coverage

Much of what attracts sellers to Roux Capital is our good coverage of the buyers universe. We have served the buyers community for a long time and have learned a lot about them. We have identified most buyers' strategy, appetite, pricing, and execution capacity. We have developed a comprehensive mapping of the secondary buyers landscape. We have learned to target buyers efficiently. When we don’t instantly know which funds sell best and at what price, we can find out in a timely and reliable manner. As a consequence, sellers in our transactions have experienced better exit conditions.

n No pricing models, only execution

We have established ourselves as an execution-driven boutique focused on price extraction and execution certainty. No sophisticated pricing models, no statistics. Just buyers’ binding offers, which must be well targeted, prompt, valid, up-to-date, ready to be compared, prioritised and executed. We unbundle a portfolio of fund interests at the individual fund level, identify the key value drivers, and assess each individual fund’s appeal to the market. We target the best buyers for each fund. Our market coverage also allows us to formulate reliable price indications in short delays.

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3.2. Secondary transfers - Solutions

Value extraction and execution certainty can be improved by adapting negotiation style to each specific situation.

n Negotiation style

We provide sell-side liquidity services for Limited Partners seeking to dispose of their interests in a fund, a portfolio of funds, or a portfolio of direct investments.

We can organise large, open and competitive auctions when sellers simply require price maximisation. We have developed the necessary reporting tools to help our clients monitor and influence the transaction process. We can also run limited auctions or narrowly focused private negotiations for sellers sensitive to discretion and efficiency.

Our transactions range from €10mn to €250mn in size. They can be global or bear more specifically on European assets.

n Mission scope

• Undertake portfolio review • Articulate indicative valuations • Assess seller's liquidity options • Select potential buyers • Obtain GP's pre-approvals • Organise NDA signatures and populate data room • Facilitate buyers' preliminary due diligence • Define format of non-binding expressions of interest and submit invitations to tender • Organise buyers' extensive due diligence • Solicit and select binding offers • Close Purchase & Sale Agreements • Ensure exercise of transfer rights by GPs and LPs • Obtain GPs' final approvals and Assignment of Interest Agreements • Follow payment of transaction consideration

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3.3. Secondary transfers - Approach

About one third of all investors seek to participate in secondary transactions. Our purpose is to take advantage of this situation on behalf of sellers.

n Apparent illiquidity, effective liquidity

Private Equity offers a valuable combination of limited liability and financial performance, but it comes in the form of illiquid Limited Partnership interests: • the term of the partnership is individually documented and initially set for the long term • interest transfer is subject to the GP’s approval • financial disclosure is succinct • there is no public market for LP interests. However, sellers can access a large pool of secondary buyers provided by existing well capitalised secondary funds and an influx of buyers from the primary market with secondary allocations.

Overall, about one third of all investors seek to participate in secondary transactions. The usual benefits associated with purchasing secondary fund stakes all appear increasingly attractive to most investors. They allow them to: • capture certainty on underlying asset quality • exit rapidly and improve return on capital • complement existing portfolio and increase focus on certain segments over time.

n Strategic concerns

In certain transactions, pricing issues may be superseded by other strategic concerns: • timing and secrecy • incapacity to disclose a loss • participation in future portfolio appreciation • management company stability • fund extension or recapitalization. n Practical solutions

Resulting solutions may take specific forms: • redefinition of governance rules, partnership agreement and management contract • management fee and carried interest change • creation of earn-out mechanism.

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4.1. Restructuring - Solutions

We execute restructuring transactions on behalf of Fund Managers through a combination of Primary and Secondary solutions.

n Primary and secondary capital sources

Mixing primary and secondary capital allows fund managers to leverage their existing investments. They bundle existing assets together with new capital to be raised, in order to source additional capital from secondary investors.

We view a fund restructuring as a disruptive event in the life of a fund, which leads to a complete redefinition of relationships between Limited Partners and the General Partner. We seek to maintain the necessary trust and balance between all parties throughout the negotiation process.

n Fund life extension

Restructuring solutions take the form of fund transfer, extension or recapitalization, top-up fund, annex fund, bridge fund, or General Partner spin-off. They allow Fund Managers to extend the size, investment period and overall life of their funds. Expiring management contracts can be renegotiated on new economic terms.

Fund Managers can redeploy capital on existing portfolio companies, or pursue new investment opportunities. We are supportive of such solutions and see them gaining momentum.

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5.1. Profile – Media

 

Lawyer Monthly: Private Equity Private Equity is an important asset class offering above average performance, portfolio rebalancing and liquidity, thanks to an active secondary market.  

 

  Acquisition International: The Secondary Boom Francois Roux describes current trends in the booming secondary market.  

 

  Private Equity Magazine: 2010, année record pour le secondaire Avec 15 milliards d'euros de transactions prévus cette année, le secondaire s'apprête à connaître son plus haut historique.  

 

  L'Agefi Hebdo: Le capital-investissement secondaire redécolle Lancé par l'opération d'Axa sur Bank of America, ce marché "de l'occasion" des parts de fonds devrait retrouver son niveau en 2010.

 

 

  L'Agefi Hebdo: Le capital-investissement lève des « fonds annexes » pour le LBO Plusieurs sociétés sous LBO ayant besoin de l’apport de nouveaux fonds propres, les gérants cherchent parfois des systèmes de « rallonge ».  

 

PEI Manager: Default Debacle With LP defaults becoming a more common occurrence, GPs need to understand all the implications of these events for the management company, for the fund, and for the other investors.

 

  Private Equity Magazine: L'Envol du Secondaire Proche de la maturité, le marché secondaire (secondary market) a fini par tordre le cou aux idées reçues. Eloigné des situations de «distressed sellers», c’est désormais un outil indispensable à la bonne gestion de la classe d’actif private equity.  

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5.2. Profile - Experience

We bring a valuable combination of Mergers & Acquisitions and Private Equity know-how to the clients we advise.

n Experience

François Roux has successfully executed several significant primary and secondary assignments with high profile funds and investors since he created Roux Capital. Prior to creating his own firm, he was a Partner at SG Private Equity for 8 years where he co-managed a €150m growth capital fund and participated in the launch of the bank's Fund of Funds activity. He previously served in M&A at Societe Generale for 7 years where he sourced and executed cross-border transactions in Europe. He has other work experience in M&A at NM Rothschild & Sons and Sales & Marketing at Digital Equipment Corporation.

n Education

François has an MBA from The Wharton School, University of Pennsylvania, where he acted as a Teaching Assistant in International Finance, and a BS from Northeastern University, where he graduated Magna Cum Laude. He speaks French and English.

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5.3. Profile - Principles

We rely on a well-established set of business principles. We expect our business partners to do the same.

n Interest alignment We possess limited size and capital, compared with the parties to our assignments. Our only way to succeed in this concentrated environment is to consistently serve our clients in their best interest.

n Hard work We are always available. We believe in hard work. We know that if we focus on the quality of our work, our financial success will follow naturally.

n Curiosity We rely on creativity and imagination to solve complex situations. We ask questions again when we do not understand. We do not take a no for an answer. We leave no stone unturned.

n Reputation We possess experience, energy and reputation. The latter takes the longest to build and the fastest to vanish. If it does so, the former two become useless. We strive to maintain our reputation.

n Confidentiality Our assignments are never publicised at our own initiative.

n Loyalty and reciprocity We act in a loyal and reliable manner, and expect our business partners to do so.

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5.4. Profile - Select us

Understanding the relationships between the General Partner and the Limited Partners, which make up the essence of a fund, is our business.

n Focus on Private Equity Private Equity Advisory is our only business. We know how to fundraise and run a secondary transaction in the current market environment. We possess the right experience, structure and mindset. n Senior level commitment Our assignments are executed exclusively at the senior partner level. We shy away from junior execution, standardised solutions and large-scale mechanisms.

n Market references We possess significant track record and corresponding market references. Contact us to verify them on an anonymous and confidential basis.

n Well targeted access to buyers We work with the most active investors. But in most assignments, we reach beyond the obvious choices and target remote investors with undisputed investment capacity.

n Independence Roux Capital is independent and conflict free. We do not have any capital links or strategic agreements with banks, financial institutions, investors, fund managers or intermediaries.

n Compliance Roux Capital Sarl is registered in France as Conseil en Investissements Financiers (Financial Investment Adviser) under ORIAS number 13000599 on the national Registre Unique des Intermédiaires en Assurance, Banque et Finance and is a valid member of ANACOFI-CIF, regulated by Autorité des Marchés Financiers.

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6. Contact us

 

Roux Capital 103, rue de Grenelle 75007 Paris, France

+33 1 40 56 94 61 francois.roux@rouxcapital.com

www.rouxcapital.com