French PE deals – Market growth and key players
France is the largest buy-out market in the EU and Mergermarket data shows that 2021 and 2022 were two consecutive record years for PE healthcare deal volume in France[1] (buyout and growth). Deal volume has grown by a CAGR of 17.4% between 2019 and 2023, driven by buyout deals in 2021 and 2022, and strong growth in PE add-ons over all three years.
France is also home to many of the most active healthcare PE investors in Europe including Ardian, Eurazeo, PAI, Astorg, and Sagard, as well as healthcare only funds such as ARCHIMED, and newer funds such as Adagia. French investment company Wendel also recently entered exclusive negotiations with European mid-market PE firm IK Partners who have done numerous healthcare deals, most recently Unither Pharmaceuticals as part of a consortium of investors[2],[i].
As a consequence of the presence of strong national funds, French healthcare deals remain largely domestic with 72.6% of PE deals (buyout and growth) between 2014 and 2023 being done by French PE firms. Ardian is by far the most active large buyout fund in the sector (Exhibit 1).[3] Together these investors have €621bn of assets under management (globally).
Healthcare services and medtech has long been the most active segments, though computer software, pharmaceuticals, and veterinary are growing fast, in line with other markets.
Despite a challenging macro backdrop and a slowdown in deal volume Q2-Q4 2023, 2023 was in fact the third most active year for PE deals in France in a decade. Based on the longer hold times for currently held assets than what we have seen in the past, we expect an increase in deal activity in the next twelve months.
Prominent deals in the past two years have focused on computer software, pharmaceuticals and veterinary
We have seen significant investor interest in the French veterinary market in recent years, including InfraVia Capital Partners’ acquisition of an undisclosed stake in Univet from Platina Equity Solutions in 2022, Eurazeo’s investment in Sevetys alongside the management team and veterinarian partners in 2022, and Ardian’s minority investment in Mon Véto. IVC Evidensia (led by CEO Simon Smith and backed by EQT) has been consolidating veterinary assets, and these acquisitions have contributed to a rapid consolidation of the market with 3% of veterinarians in France working for one of the larger groups in 2019 versus 19% by April 2022.[i]
In the past decade Ardian has been the most active among the larger PE funds and in the last two years is has acquired a minority stake in Simago in 2022 (network of medical imaging centres, joining existing sponsors BC Partners, Eurazeo and infra fund Antin), and a majority stake in Théradial in 2023 (provider of medical solutions for dialysis) from UI Investissement.
2021 and 2022 were recorded years for PE deals in France
2021 and 2022 were both record years for PE and PE backed healthcare deals in France, growing with a CAGR of 17.4% between 2019 and 2023, and reaching a record high 86 deals in 2022 (Exhibit 3). 2023 saw a slowdown but still ended as the third most active year for healthcare PE deals in a decade.
Just like we have seen in other markets, a challenging environment of inflation, higher interest rates, supply chain issues, and energy prices has dampened the mood among investors in France. Hence, we have seen a gradual decline in deal volume since Q2 2023 with Q1 2024 run-rate being the quietest quarter since Q3 2021 (Exhibit 4).
Though this paints a sombre picture, hold times for currently held assets have grown by five months to 3 years and 8 months indicating that investors are waiting out more favourable market conditions. Given this, we expect an increase in deal activity in the next twelve months (Exhibit 5).
French deals remain largely domestic
72.6% of French PE healthcare deals (buyout and growth) between 2014 and 2023 have had French PE firms as bidders. UK firms represent the second largest investor group in the market (measured by country) with 13.1% of PE healthcare deals done by UK based PE firms. US investors come in thirds at 5.5% of deals (Exhibit 6). Together, investors from these three markets make up 91.2% of all PE deals involving French assets between 2014 and 2023.
Montagu Private Equity has been the most active foreign investor in recent years, for example acquiring In’Tech Medical in 2021 (co-development and manufacturing of orthopaedic surgical instruments), and HTL Biotechnology together with Partners Group in 2022 (critical pharmaceutical-grade biopolymers used in medical applications). However, local presence and market knowledge is important however and Montagu also has an office and a team of 20+ people in Paris.
France is home to some of the largest European healthcare investors
There are a multitude of French PE firms active in the market, including ARCHIMED (led by Chairman and Managing Partner Denis Ribon), Ardian (led by founder and CEO Dominique Senequier), Eurazeo (led by Co-CEOs Christophe Bavière and William Kadouch-Chassaing), PAI (led by a three person management committee), Astorg (led by CEO and Managing Partner Thierry Timsit), Sagard (led by Chairman and CEO Paul Desmarais III), and Naxicap (led by CEO Éric Aveillan) (Exhibit 1).
Adagia Partners (led by Managing Partner Sylvain Berger-Duquene) is a newcomer in the market, with partners bringing experience from Adrian, PAI Partners, Astorg Partners, and Montagu among others. Despite only closing its first fund in September this year[i], the firm has already acquired France-based Minlay (manufacturer and distributor of dental prostheses, led by CEO Eric Darrou), and Germany-based Schwind Eye-Tech-Solutions (products for the treatment of vision defects and corneal diseases, led by CEO Domenic von Planta).
Two additional actors in the market worthy of mention are Bpifrance and Sofinnova.
Bpifrance is a French public sector investment bank and a joint venture of two state owned enterprises: the Caisse des dépôts et consignations and EPIC BPI-Groupe. Bpifrance mainly supports micro-businesses, SMEs and mid-caps but also support large caps that are considered important to the interests of France. The investment bank has been involved in more healthcare deals ($5m+) in France between 2014 and 2024 YTD than any other investor.
Sofinnova is a venture capital firm which invests in life science companies, specialising in healthcare and sustainability. In 2022 American private equity firm Apollo took a minority equity interest in the French venture capital firm and committed up to €1 billion of managed capital to its investment funds.[ii]
French PE firms often have a multi-strategy approach
Unlike in the UK, French PE firms usually have broader strategies and do growth projects, and/ or operate their own VC arms (Exhibit 7).
Many French PE firms can make minority or majority investments. For example, Eurazeo’s Nov Santé fund (managed on behalf of the French Insurance Federation (FFA) and Caisse des Dépôts (French public sector financial institution)) can make minority investments of between €10m and €40m in the fields of healthcare research, manufacturing and services.
Investors are showing interest in French computer software and pharmaceutical assets
Investors have pivoted to tech enabled models and pharma services driven by a macro outsourcing trend (Exhibit 8).
Computer software combines defensive (healthcare) and scalable, high growth assets (IT), providing strong customer stickiness and attractive recurring revenue streams, and experiencing strong funding tailwinds across Europe.
Recent French deals in this sector include Abenex’ acquisition of Edition et Développement Logiciels (EDL) in 2021 (software provider for medical imaging services), Eurazeo’s investment via Nov Santé in Groupe PSIH in 2021 (business intelligence solutions for hospitals and the health care industry), and IK Partner’s investment via its IK Small Cap III Fund in Sofia Développement Group in 2022 (tele-transmission software as well as patient management and invoicing tech-enabled services).
Drug manufacturing is also an active sub-sector in pharmaceuticals in France with 24 deals (or 71% of total pharmaceuticals deals) since 2014, and 12 being completed in the last 4 years. 17 of these 24 deals, or 71%, were also involved in drug development. This reflects the trend we are seeing on a global level with an increased investor interest in outsourcing services (CROs, CDMOs, and CPOs). This is driven by both US pricing control legislation which has strengthened outsourcing trends by emphasising the need for speed to market and cost reduction, and by the shortfall in manufacturing capacity.
Recent French deals in this sector include SK Capital Partners acquisition of Seqens (CDMO) in December 2021, and Montagu and Partners Group’s acquisition of HTL Biotech (CDMO) in February 2022.
Conclusions and forward view
France is the largest buy-out market in the EU in terms of value and home to many prominent healthcare PE investors. We have seen significant PE healthcare deal activity in the last three years in France (buyout and growth) with investors increasingly looking at computer software, pharmaceutical and veterinary assets. Investments in pharma services especially reflects a global trend we are seeing with an increased investor interest in CROs, CDMOs, and CPOs.
Despite a recent challenging macro environment and a slowdown in deal activity, past deal volumes and current longer hold times indicate that we should soon see a change in the downward trajectory of the last few quarters and a return of a strong deal flow for French healthcare assets.
[1] IK Partners (17 October 2023): IK Partners enters into exclusive negotiations with Wendel. Available at: https://ikpartners.com/2023/10/17/ik-partners-enters-into-exclusive-negotiations-with-wendel/#:~:text=Wendel’s%20stake%20is%20being%20acquired,the%20first%20half%20of%202024. (accessed 4 March 2024)
[1] Phylum (17 May 2022): Consolidation of veterinary care centres in France. Available at: https://www.phylum.fr/en/blog/consolidation-veterinary-care-centres-france (accessed 6 March 2024)
[1] Preqin (22 September 2023): Adagia beats target with €1.1bn final close for first private equity fund. Available at: https://www.preqin.com/news/adagia-beats-target-with-1-1bn-final-close-for-first-private-equity-fund (accessed 30 November 2023) [1] Apollo (16 May 2022): Sofinnova Partners and Apollo Form Strategic Partnership in Life Sciences. Available at: https://www.apollo.com/insights-news/pressreleases/2022/05/sofinnova-partners-and-apollo-form-strategic-partnership-in-life-sciences-130018803 (accessed 6 March 2024)
