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Energised for growth

Sicame’s performance has been electrified by the recruitment of a strong executive team, operating within a clear governance structure.

Château de Pompadour

THE TINY VILLAGE of Arnac-Pompadour in the Correze, in the centre of France, is the cradle of the Anglo-Arab breed of horses and the home of France’s National Stud. It is also home to another thoroughbred − the 66-year-old company Sicame, which is a recognised world leader in the production of connection accessories for electrical networks.

Equistone originally acquired a minority stake in Sicame from Fund III in December 2009. Since then, the company’s revenues had continued to grow solidly above market growth at an annual rate of five per cent.

It was not hard to see why both trade and financial buyers had continued to circle around Sicame in the ensuing years. This was a business enjoying long-standing relationships with major utilities, and a large, diversified base of customers, products and geographic markets. Global, yet specialist, barriers to entry into its markets were high due to the technical expertise and certifications required.

Even so, it had the potential to gallop, with significant upside remaining.

Sicame's CEO, Vincent Roy.

In 2015, the company’s former COO, Vincent Roy re-joined the business to replace the retiring CEO. Mr Roy knew the company well and he provided a powerful catalyst for change. Additional key recruitments were made; a new CFO was appointed to lead a reshuffled finance team, along with new business unit managers.

Equistone was equally convinced of Sicame’s potential. But the plans to improve its performance needed a simple, cleaner governance structure – and the timescales for such improvement would fall outside the life of Fund III. There was the opportunity for Fund III to sell and for Equistone to reinvest as a lead partner through Fund V.

For a private equity house to pass from a minority to a majority position, and from one fund to another, is not a lightly undertaken task. “The challenge was to clear all potential conflicts of interest around the transaction, which included ensuring that the investors in Fund III and Fund V could be reassured that we had found a fair valuation,” says Equistone senior partner, Grégoire Châtillon.

In 2016, Equistone Fund V invested approximately €100m for a majority equity stake alongside the founding family, Crédit du Nord, other individual investors and the management team.

Taking control was crucial. “Before the 2016 transaction there were no majority shareholders, so agreement had to be sought between multiple parties,” says partner, Grégoire Schlumberger. “After the 2016 transaction the group’s governance was clarified. We had a good knowledge of strengths and weaknesses of the business but, as minority shareholders, we had not been able to influence the growth strategy as we would have liked. Becoming the majority shareholder alongside the historical families and the management, we have been able to define jointly a development plan for the group for organic growth, and also through targeted acquisitions.”

Becoming the majority shareholder alongside the historical families and the management, we have been able to define jointly a development plan for the group for organic growth, and also through targeted acquisitions.
Grégoire Schlumberger

For the Equistone team, it was a very different situation from coming into a fresh investment. “When we became majority shareholders, we had a real and intimate knowledge of the company and had precise ideas about what change and adaptation was needed,” says Grégoire.

Grégoire Châtillon

An intense period of interaction with Mr Roy and his executive team followed and the pace has not slackened. “An enormous amount of work and positive change has been affected by Mr Roy and his team,” says Gregoire Châtillon. It demonstrates the significant value creation of recruiting the right executives.

The management structure was realigned and streamlined; operations were much more tightly integrated; improvements were made to internal communications and sharing of best practice, while new financial reporting standards were introduced, along with new IT tools, treasury and financing processes.

As a large and complex group buying many materials – more than 20,000 products are distributed in more than 170 countries – procurement has been another focus of management effort, with Equistone helping to source external consultants and specialists.

Since 2016, seven acquisitions have been made including the significant acquisition of Seifel in France. In the US, Sicame has bought two long-established businesses: California’s Kortick Manufacturing produces electrical products and equipment for use in overhead and underground electrical networks; and ASK Power produces industrial connectors. In Chile, it has bought COMULSA giving it a strong presence in Latin America, and in Europe, it has acquired Safak in Turkey and Skelt in Portugal.

Seven international bolt-ons since 2016.

Next, a systematic approach to the company’s acquisition strategy was put in place. “We have a clear ranking of M&A priorities, by geography and by type of product, to target what would create most value for the group,” says investment director, Florent Rostaing.

Even bigger changes have been made to post-acquisition integration practices, which “now takes place much faster,” says Florent. And Sicame has been more active in its divestments of non-core activities – an area that had not been so closely scrutinised before.

Equistone’s Florent Rostaing and Guillaume Jacqueau.

As a large local employer, Sicame had been an attractive lending target for many domestic banks. The result had been an unwieldy collection of scores of short- and medium-term loans all on different terms and prices. “Cash management was complex and very time-consuming for the finance teams,” says Florent. These financing lines of the group were centralised into a €230m structured facility with dedicated acquisition and capex lines. “It’s a good example of where refinancing can create value and free up time for management,” he says.

As a result, today’s Sicame is a larger, more profitable enterprise: its 2019 revenues had climbed to €426m and EBITDA above €50m. But the work is not yet over. “It takes time to make big changes. “This has been a long story and we have been patient and hope that will be rewarded.”

From its initial investment with Fund III in 2009, Equistone had been attracted by the broader sector. “There are positive long-term drivers related to electrification, and this is even more true today thanks to renewable energy production, and the fast development of electrical mobility,” says Grégoire Schlumberger.

In France and other mature economies, electricity networks not only have to be maintained but are also increasingly being take underground; pylons are not only being replaced on aesthetic grounds but because underground networks are more resilient and easier to maintain. In developing economies, huge projects to build out electricity networks are under way.

Since then, the global drive towards renewable energy and the roll-out of electric vehicles has accelerated the drive to electrify. The much more widely distributed generation of renewable energy, and the requirement of charging points for EVs, places greater demand on the capacities of the networks, leading to greater demand for Sicame’s products. “Big further waves of electrification are coming, and Sicame is well positioned to meet this demand because of the way it has reinforced its domestic and international presence,” says Grégoire. “The management team can be proud of this achievement.”

The third generation of the family of Sicame’s founder Basile Lachaud remain shareholders. The main production facility remains in a small town in the Correze, where the main street is named after the founder, and it remains the largest employer in the area. Locally, it is a very important enterprise.

“We recognise that legacy and the family have confidence in us and trust our judgement. When a business needs to be modernised and professionalised, that change can be for the worse if its values and the DNA of the group are lost. But Sicame has changed for the better and it has kept its history,” says Grégoire Schlumberger. The owners and trainers of this Correze thoroughbred have ensured it is ready for its next winning season. 

A full version of this article appeared in PLATFORM 05, Summer 2021