France Open for
Investment in Deep
Private Equity Market
France Open for
Investment in Deep
Private Equity Market
On some measures, the French private equity market is the largest in Europe. According to France Invest, a total of 2,857 businesses and infrastructure projects received French private equity investment in 20221, compared to the 1,944 companies that received UK-led private equity investment based on research from the association’s British peer, the BVCA2.
The data highlights a market that is not only large, but also deep and sophisticated with high levels of activity spanning venture capital, mid-market, and large-cap private equity. This is executed by large numbers of experienced private equity firms and backed by a mature ecosystem of advisors. And increasingly, the industry is benefitting from a supportive political environment that aims to drive further private capital investment in France, and position Paris as the leading hub in the European Union (EU) for financial services following Brexit.
On some measures, the French private equity market is the largest in Europe. According to France Invest, a total of 2,857 businesses and infrastructure projects received French private equity investment in 20221, compared to the 1,944 companies that received UK-led private equity investment based on research from the association’s British peer, the BVCA2.
The data highlights a market that is not only large, but also deep and sophisticated with high levels of activity spanning venture capital, mid-market, and large-cap private equity. This is executed by large numbers of experienced private equity firms and backed by a mature ecosystem of advisors. And increasingly, the industry is benefitting from a supportive political environment that aims to drive further private capital investment in France, and position Paris as the leading hub in the European Union (EU) for financial services following Brexit.
Developed Homegrown
Private Equity Industry
France is home to a host of experienced domestic firms, as well as pan-European and international players, many with French offices. Its domestic investment funds also rank as some of the biggest and most active in Europe. With 153 deals in 2023, Bpifrance, the country’s state-backed investment fund, was Europe’s busiest private equity investor of the year, while Ardian was the third with 74 investments. Bpifrance was also successful in realizing deals in a challenging market with its 18 exits also ranking as one of the best performances of any firm globally3.
Deals are not only happening in the mid-market and SME space, but also on a larger scale, drawing in large cap focused international private equity firms. Brookfield’s purchase of Data4, a French data centers business, was one of the largest deals globally last year, valued at some €3.5bn4. At the same time, France’s tech sector is carving a reputation as one of the world’s most vibrant. Start-up Mistral AI, a challenger to ChatGPT developer OpenAI, achieved a valuation of approximately $2bn in its Series A funding round in December, just seven months after the company’s formation5.
Persistent activity across all segments signals a market that is both transparent and open, resulting in healthy competition and deal flow. It also points to an industry that has good standing with the political establishment in France, underlining broad acceptance for private capital, as well as increasingly favorable regulation governing investment in companies.
Developed Homegrown
Private Equity Industry
France is home to a host of experienced domestic firms, as well as pan-European and international players, many with French offices. Its domestic investment funds also rank as some of the biggest and most active in Europe. With 153 deals in 2023, Bpifrance, the country’s state-backed investment fund, was Europe’s busiest private equity investor of the year, while Ardian was the third with 74 investments. Bpifrance was also successful in realizing deals in a challenging market with its 18 exits also ranking as one of the best performances of any firm globally3.
Deals are not only happening in the mid-market and SME space, but also on a larger scale, drawing in large cap focused international private equity firms. Brookfield’s purchase of Data4, a French data centers business, was one of the largest deals globally last year, valued at some €3.5bn4. At the same time, France’s tech sector is carving a reputation as one of the world’s most vibrant. Start-up Mistral AI, a challenger to ChatGPT developer OpenAI, achieved a valuation of approximately $2bn in its Series A funding round in December, just seven months after the company’s formation5.
Persistent activity across all segments signals a market that is both transparent and open, resulting in healthy competition and deal flow. It also points to an industry that has good standing with the political establishment in France, underlining broad acceptance for private capital, as well as increasingly favorable regulation governing investment in companies.
Geared Towards Private Equity Investment
Investors in France have long been wary about the country’s labor laws, with concerns exacerbated by regular strike action and protests, such as those that accompanied the government’s decision to lift the minimum state pension age to 64 last year. However, since coming to power in 2017, the Macron administration has made reforms that mean more flexibility and clarity for employers, such as the streamlining of employees’ representation bodies (from three different bodies depending on the size of the company to only one). Litigation around unfair dismissal claims has been time-limited (and plans for further reduction of such time limit are under discussion) and damages capped.
Not only has market sentiment improved towards doing deals in France, but Paris is also carving an increasingly large space in European and global financial services. Since the UK’s decision to leave the EU, some 7,000 new finance jobs have been created in Paris, mainly in investment banking, with the government eyeing new reforms to encourage private equity and other funds to base themselves in France. These proposals include measures to make it easier to invest in quoted companies, list small and medium-sized private equity-backed companies on French exchanges, and establish more favorable rules around laying off high earners6.
More broadly, the Macron government has been among the most vocal in supporting private capital in Europe. In a meeting with fellow EU finance ministers in February, France’s Bruno Le Maire said that the Capital Markets Union was essential to mobilize private investment to decarbonize and drive the digital transformation of the European economy, and even proposed that some states should push ahead with the plan independently of the wider bloc7.
Not only has market sentiment improved towards doing deals in France, but Paris is also carving an increasingly large space in European and global financial services. Since the UK’s decision to leave the EU, some 7,000 new finance jobs have been created in Paris, mainly in investment banking, with the government eyeing new reforms to encourage private equity and other funds to base themselves in France. These proposals include measures to make it easier to invest in quoted companies, list small and medium-sized private equity-backed companies on French exchanges, and establish more favorable rules around laying off high earners6.
More broadly, the Macron government has been among the most vocal in supporting private capital in Europe. In a meeting with fellow EU finance ministers in February, France’s Bruno Le Maire said that the Capital Markets Union was essential to mobilize private investment to decarbonize and drive the digital transformation of the European economy, and even proposed that some states should push ahead with the plan independently of the wider bloc7.
Loi Pacte: Creating More Investor-Friendly Business Structures
Hand in hand with labor market reforms, the French government introduced legislation to drive the growth and transformation of companies, otherwise known as the Loi Pacte. The law, which came into force in 2019, targeted reduced bureaucracy and more investor-friendly business structures. Among the most important elements of the legislation for the private equity industry was the broadening of the free shares regime that can be used by companies and their sponsors to create incentive schemes for management teams and employees.
For more than a decade, the French landscape has been marked by uncertainties relating to the tax and social security treatment applicable to certain management incentive plans (in particular options and warrants). Recent case law developments, including landmark decisions rendered in 2021 by the Conseil d’Etat (France’s highest administrative court) changed the prevailing grid of analysis applied to determine in which circumstances such incentives could be classified as income rather than capital gains, leading to both higher personal income tax at manager level and social contributions liabilities at company level. Against that background, the fact that the grant of free shares to employees is governed by specific legal and tax provisions offers a more secured legal and tax framework.
French Private Equity Investment Restarts Strongly in 2024
Compared with stagnant economic performance for its neighbors Germany and the UK in 2023, France avoided recession and posted modest growth of 0.9% for the year, according to EU data8. The country is expected to maintain that pace of growth in 2024 with inflation forecast to continue its downward trend. Against that backdrop, private equity activity is picking up rapidly.
French Private Equity Investment Restarts Strongly in 2024
Compared with stagnant economic performance for its neighbors Germany and the UK in 2023, France avoided recession and posted modest growth of 0.9% for the year, according to EU data8. The country is expected to maintain that pace of growth in 2024 with inflation forecast to continue its downward trend. Against that backdrop, private equity activity is picking up rapidly.
We see strong competition returning to the market, with ever more fast-paced auction processes and the normalization of pre-emptive bids for the highest quality assets. While broader volatility and uncertainty remains, there is limited appetite for more challenged businesses and complex situations, with the exception of carve-outs from larger corporates, which are always in high demand when they can be identified. Assuming the continuation of relatively benign conditions and ongoing recovery across European markets, we see an active year for private equity in France.
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