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Concluding a successful partnership with Finaxy

How has the experience of deal-making and value creation been in France during 2020? In this article, Grégoire Châtillon and Julie Lorin describe the successful sale of Finaxy last year, amid wider market upheaval. 

AT THE END of September, we secured the sale of insurance brokerage Finaxy to Ardian, an international investment house, headquartered in Paris.

Equistone team: Grégoire Châtillon, Julie Lorin and Guillaume Jacqueau.

The fact that our three-person deal team, including Guillaume Jacqueau, was able to successfully conclude this investment in the face of unprecedented wider economic uncertainty was made possible by the strong foundation that Finaxy had built, and the trusting partnership we had forged with management since we became shareholders in 2014.

First, the backstory. Equistone backed Finaxy just a few years after it was founded. The business had been growing quickly, through acquisition. At the time, even for a primary MBO, the information gaps were significant. There was no investment memorandum, no vendor due diligence and no CFO. It required extensive work to build a picture of the business.

Despite all this, it was very clear that Finaxy was led by a CEO, Erick Berville, with passion and ambition for the business. This gave us the conviction to go ahead.

Finaxy CEO and founder, Erick Berville

Erick Berville is an entrepreneurial business leader with deep experience and networks in his industry. He saw the opportunity to execute a consolidation strategy and build a niche insurance brokerage focused on SME customers and positioned away from the mainstream market, where there was greater competition and lower margins.

Over the next five years, Equistone worked with management to build more structure following its investment. A CFO was brought in and a central function created. There was also a focus on building a group culture and integrating acquisitions into a cohesive, new player in the market.

Fast forward five years, and we had an asset with the ability to prepare for a demanding sales process, while executing and integrating two add-on acquisitions, JL Assurances and AGEF Courtage, in early 2020 – all the while maintaining business continuity through Covid-19 disruption (the business doubled sales during our investment.)

We began the exit process at the end of 2019, mandating Lazard to lead the sales process and management meetings held at the end of February 2020. Although the process had progressed, and Finaxy was trading to forecast, we took the decision to put the sale on hold as Covid-19 case numbers accelerated across Europe, and lockdowns came into effect.

The company’s earnings were on-budget and the nature of the business meant the transition from office to home locations was smooth, but we wanted to step back and do more work on the investment memorandum and vendor due diligence, in order to pre-empt buyer questions on Covid’s impact on the company.

In preparation, we remodelled forecasts for Covid scenarios, which enabled us to return to market with clear evidence that EBITDA had kept to target through the lockdown.

It was critical that we did this work because now we could provide hard numbers that showed earnings had not been impacted, while enabling us to model the post-lockdown landing for the business. Alongside the management team, we were therefore able to relaunch the process with confidence.

With all the deal mechanics in place, the element that truly enabled us to get the deal done was our trusting and positive relationship with Erick and his team. After Equistone, Erick wanted to keep the business independent. Therefore, we structured the process around management and opened it only to private equity. This meant we went into the sale completely aligned. This was key to reopening the process, and it presented buyers with an enthused senior management team eager to do a second management buyout.

The competing sponsors could see a company with recurring sales, that had traded well through lockdown, with further scope for growth through acquisition. (There are still thousands of small brokerages in France, and there is a clear trend toward consolidation, driven by regulatory requirements and digitalisation.)

The management team did an excellent job throughout the sales process and deserve a huge amount of credit for the work they did to move the deal forward through a very uncertain period. 

A full version of this article appeared in PLATFORM 04, Winter 2020/21