Q4 macroeconomic data points in France’s markets are marginally better than in Q3, according to an update from Pitchbook.
Q4 GDP growth was reported as flat by Pitchbook, while inflation has been “coming down from the elevated levels seen earlier in the year.”
Meanwhile, the consumer price index in France has reportedly decreased from 5.7% in Q3 to 4.1% in Q4 as inflation “started responding to higher rates set by the European Central Bank.”
Energy prices dropped “noticeably in Q4 after a volatile Q3, which helped the overall inflation drop.”
The report from Pitchbook also mentioned that the euro rallied when “compared to the dollar in Q4, up 4.3% and ending the year at €1/$1.1038.”
Unemployment ended the year in at 7.3% in France, which is reportedly “higher than the 6.0% EU27 average.”
Moving forward, the International Monetary Fund forecast “as of January 2024 that the French economy will grow 1.0% in 2024, which is below the average for advanced economies but still higher than the other large European economies such as Germany (0.5% projected), Italy (0.7% projected), and the UK (0.6% projected).”
At a news briefing in February, Finance Minister Bruno Le Maire said:
“Lower growth mean slower tax receipts, so the government must spend less.”
France had already pledged “to €16 billion in cuts in its 2024 budget, but a further €10 billion in cuts were announced following lower growth projections.”
Public equity markets:
The CAC 40 finished 2023 “up 16.5%, outperforming other European indexes such as the STOXX Europe 600 (13.2%) and the FTSE 100 (3.4%).”
The composite’s largest holding, luxury group LVMH, “was the first European company to reach a market cap of $500 billion back in April 2023, capitalizing on a demand boom from Chinese consumers after China lifted COVID-19 restrictions.”
Despite the market rallying in Q4, “the CAC 40 P/E ratio dropped to 12.8x in Q4, down from 13.7x in Q1. There were no public listings from PE/VC backing in France in Q4 asthe IPO market remains muted. 2023 closed with only four public listings, all coming from the VC side: Allurion, Vinpai, OSMOSUN, and lePERMISLIBRE.”
Venture capital:
France VC deal value dropped sequentially “from Q3 to Q4 but was still slightly up compared with Q4 2022. Exit count increased from 241 VC deals in Q3 to 275 in Q4 but remained well below its five-year average of 365 deals per quarter.”
Two new unicorns, Mistral AI and Ledger, “achieved the milestone, bringing total French unicorns to 21 as of the end of 2023.”
France VC exit value picked “up 25% +0 H2 2023 from H1, with two of the top five exits in 2023 closing towards the latter part of the year.”
Big Mamma, the restaurant group “specializing in Italian restaurants across Europe, was sold for €270.0 million to PE food specialist McWin Capital Partners, and Inari Medical acquired LimFlow for €392.7 million.”
France VC fundraising almost “halved from 2022, raising only 13 new funds (down from 23) worth a combined €1.8 billion.”
The Pitchbook report added that fundraising conditions “were challenging given the macroeconomic backdrop.”
As a result, funds were much smaller than in previous years:
The last time we saw a VC fund larger than €500 million “was in December 2021, when BNP raised €739 million for its Agility Capital Fund.”
Pitchbook further noted that private equity French PE deal value “fell 19.9% YoY in 2023 as higher interest rates increased borrowing costs for sponsors and limited the amount of leverage deployed across deals.”
No mega deals were executed or announced in Q4 “as activity plateaued towards the end of the year.”
PE exit value in France reportedly “fell sharply in the second half of 2023, down 59.5% from H1.” In fact, Q4 was the worst quarter of exit value “since Q2 2020, when the pandemic erupted.”
The fact that public listings remained closed played “a big role in the lack of exits in 2023.”
The Pitchbook report pointed out that there were “no public listings from PE-backed companies in the entire year—an unprecedent&% event.”
PE fundraising saw mixed signals, the report added while noting that the total capital raised in 2023 outpaced 2022 “by 66.8%, yet fund count almost halved, meaning there were fewer new funds, but they were generally larger.”
The largest fund closed in 2023 “was ARCHIMED’s MED Platform II, which specialises exclusively in healthcare.”
The fund raised €3.5 billion “over 18 months, exceeding itsinitial target of €2.0 billion.”
MED Platform II is now “targeting 14 investments versus the seven that MED Platform I invested in.3”
Within private equity, 2023 will be remembered “for a lack of exits as evidenced by the sharp drop in exit value in France, among other countries.”
As a response, both LPs and GPs have “tapped the secondaries market as a solution for liquidity. LP-led secondaries allow LPs to exit their positions mostly for rebalancing purposes without affecting the GPs.”
On the other hand, GP-led secondaries give “more flexibility to the GPs, which not only enables existing LPs to exit and new LPsto enter, but also allows the GPs to roll over their most precious assetsinto continuation vehicles.”
The secondaries market is growing worldwide, “including in France. Ardian, the French buyout giant with over €150 billion in AUM, has reportedly raised over $20 billion from investorsfor a new secondaries fund, which it aims to close at $25 billion.”
The Abu Dhabi Investment Authority (ADIA) has agreed “to commit $6 billion as the sovereign wealth fund is stepping up its private market allocations. Once closed, it will be the largest secondaries vehicle in Europe and third largest globally, behind Blackstone’s Strategic Partners IX and Lexington’s LCP X, which both recently closed.”
In other developments, France continues to “look at modifying legislationsto increase the attractiveness of Paris within financial services.”
The Pitchbook report concluded that in “a new rule concerning private equity, sponsors will now be able to invest in French companies with a market capitalization of up to €500 million, raised from a limit of €150 million.”
