roux capital brochure
DESCRIPTION
Presentation of Roux Capital's Private Equity Primary & Secondary Advisory Activity.TRANSCRIPT
Roux Capital Private Equity Primary & Secondary Advisory Page 1/12
Private Equity Primary & Secondary Advisory
Roux Capital
103, rue de Grenelle 75007 Paris, France
+33 1 40 56 94 61 [email protected]
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. Secondary Sellers 2.1 Liquidity 2.2 Solutions 2.3 Approach 3. Secondary Buyers 3.1 Sourcing 3.2 Approach 4. Fund Managers 4.1 Restructuring 4.2 Fundraising 4.3 Approach 5. Profile 5.1 Media 5.2 Experience 5.3 Principles 5.4 Select Us 6. Contact
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1. About
Roux Capital is an independent secondary adviser exclusively focused on Private Equity.
We cover all types of funds on a worldwide basis in buyouts, venture capital, expansion capital, real estate, infrastructure, energy, special situations, mezzanine, and specialised funds. Our assignments bear on funds of any size, maturity, structure and geography.
n Secondary sellers
We advise investors seeking liquidity for their limited partnership interests.
n Secondary buyers
We grant access to privately negotiated acquisition opportunities to a select pool of buyers.
n Fund managers
We assist fund managers seeking to restructure their existing investors base, and act as a placement agent.
2. Secondary Sellers We believe secondary sellers can extract the highest value for their funds if they can access the right buyers across the board. 2.1 Liquidity n We serve sellers well because we know buyers well
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 buyer’s strategy, appetite, pricing, and execution capacity, at the individual fund level. We have developed a comprehensive mapping of the secondary buyers landscape. We have learned to target buyers efficiently. We know which funds sell best and at what price. As a consequence, sellers in our transactions have extracted more value and enjoyed more execution certainty.
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 detailed 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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2.2 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 €100mn in size. They can be global or bear more specifically on European assets.
n Mission scope
• Undertake portfolio review • Articulate indicative valuation • Assess sellers' liquidity options • Define appropriate market approach • Monitor disposal process with potential acquirers • Ensure closing materials reflect state of discussions
and common market practice • Liaise with clients' legal counsels specialised in
Private Equity Secondary transactions.
2.3 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 Taylor-made approach
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. Resulting solutions may take specific forms:
• redefinition of governance rules, partnership agreement and management contract
• management fee and carried interest change • management company ownership transfer • creation of earn-out mechanism • stapled deal, top-up fund, annex fund, bridge fund.
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3. Secondary Buyers We source opportunities for buyers globally through our direct proprietary network. We rely on our longstanding relationships with sellers and our on-going discussions with general partners. 3.1 Sourcing n Buy-side intelligence
Every buyer possesses a unique view when it comes to the value of a fund. We feel fortunate when buyers share such information with us. This allows us to find the right assets for them at the right conditions. We started in the secondary business by serving buyers, and continue to do so.
n Flexible investment strategy
Our buy-side secondary model allows sophisticated investors to access proprietary secondary transactions directly, maintain their autonomy and sovereignty in their investment decisions, remain flexible in their investment strategy over time, and save on fund managers' remunerations.
n Privately negotiated transactions
We identify confidential and remote secondary acquisition opportunities through our direct proprietary network and introduce them to our clients on a case-by-case basis. We offer secondary buyers a specific angle to a transaction, often directly from the General Partner or through intimate knowledge of the selling Limited Partners’ concerns not yet known to the market.
We seek to keep the transaction momentum by acting promptly and diligently on the buyer’s behalf. We participate in all steps of the transaction process and assist in the structuring and closing of the transaction.
3.2 Approach We ask buyers who trust us to document their appetite at the individual fund level. This allows us to better address sellers' expectations and initiate a transaction. n Addressing sellers’ needs
We constantly approach potential sellers in Europe to identify those transactions which have not yet been intermediated or publicised. Capturing seller's attention requires that we provide them with pertinent solutions, appropriate value extraction, and execution certainty. So we must address their needs from the start, often by having identified and priced their funds specifically.
We ask buyers who trust us to help us do so by stating their strategy, appetite, pricing, and execution capacity at the individual fund level.
n Transaction type
Our transactions often have a European component, as we source either European buyout funds or overseas buyout funds sold by European Limited Partners. They range from €10mn to €100mn in size.
n Active market
Top sellers are banks and insurance companies for respectively Basel III and Solvency II reasons. Other sellers can be motivated by cash constraints, undercapitalisation, lack of strategic interest for the asset class and general desire to rebalance illiquid exposure.
Sellers are generally motivated by internal strategic considerations rather than by portfolio quality issues. They seek to:
• implement investment strategy shift and reallocation • meet liquidity needs and bottom line objectives • reduce the number of general partners relationships • sell non-core assets which lost their strategic value.
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4. Fund Managers 4. 1 Restructuring We execute restructuring transactions on behalf of Fund Managers through a combination of Primary and Secondary solutions. n Primary and Secondary capital
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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4.2 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 Investors 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, wealth managers, family offices and ultra high net worth individuals. We can leverage it selectively to help certain fund managers raise capital.
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 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. For the time being however, investors reduce the number of fund managers with whom they invest, at the expense of more recent or less known funds coming to the fundraising market. Hence fund managers are now competing more fiercely for capital.
n Mission scope
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, organise meetings • Report investor feedback • Provide ongoing market intelligence Legal documentation
• Identify best practices • Assist the fund in negotiations with investors • Liaise legal counsels • Enable prompt closing
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4.3 Approach In their relationships with investors, fund managers must acknowledge the unique features of the asset class: performance persistence and performance dispersion.
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.
This is largely due to the fact Private Equity fund managers exercise broad skills in a complex transactions environment. A select number of outstanding managers succeed in it and constantly enjoy superior returns, while a majority of fund managers realise mediocre performance.
n Implications
Sophisticated investors pay increasingly attention to what makes Private Equity a unique asset class, i.e. performance dispersion and performance persistence:
• 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.
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 ? • how much financial and operational restructuring is
required on unrealised portfolios ? • what is a reasonable exit horizon for each portfolio
company, and at what reasonable exit value ?
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5. Profile 5.1 Media
Lawyer Monthly: Private Equity October 2011 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 May Issue 2011 Francois Roux describes current trends in the booming secondary market.
Private Equity Magazine: 2010, année record pour le secondaire Stéphane Gillier, novembre 2010 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 Fabrice Anselmi, 20-26 mai 2010 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 Fabrice Anselmi, 22 au 28 Octobre 2009 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 Jennifer Harris, June 2009 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 Fabrice Anselmi, Juin-Juillet 2008 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 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 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.
5.3 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 Loyalty
We act in a loyal and reliable manner, and expect our business partners to do so.
n Confidentiality
Our assignments are never publicised at our own initiative.
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5.4 Select Us We serve demanding Limited Partners and General Partners looking for independent expert advice and reliable execution capacity.
n Focus on Private Equity
Private Equity Advisory is our only business. We know how to run a Primary or Secondary assignment in the current market environment. We possess the right experience, structure and mindset.
n Senior level commitment
Our transactions 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 acquirers
We work with the most active investors. But in most assignments, we reach beyond the obvious choices. On a case-by-case basis, we target remote and less known European investors with undisputed execution 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.
6. Contact
Roux Capital
103, rue de Grenelle
75007 Paris, France
+33 1 40 56 94 61
[email protected] www.rouxcapital.com
Associate Member, EVCA
Roux Capital Sarl is registered with Autorité des Marchés Financiers (Nbr E003046) as Conseil en Investissement Financier (Financial Investment Adviser).