Interview with Xavier Robert, Chief Investment Officer of Brigepoint, on the macro-economic context and its impact on private equity.
Summary
Written transcription
Xavier Robert: He's clearly pro-business, and his whole policy is going to be to push American growth. So it's going to be good for the US, so it's going to be good for private equity in the US, that's clear. And growth is going to come from two main sources in the United States: the re-industrialization of the US. So, I'll come back to the question of tariffs, because I think this is an issue for Europe, and above all everything that revolves around technology and Artificial Intelligence in particular. Unfortunately, Europe has missed this train a little, but it's really going to drive American growth. So, from that point of view, I'm quite bullish on US growth under Trump, and that's going to be good for US private equity. After that, if you invest in a fund like Bridgepoint, then our Private Equity division invests in companies based in Europe, but in fact, one of our trademarks is the internationalization of these companies, in Europe, but also very much in the United States. We've had offices in the United States for ten years, helping these European companies to develop in the United States. And so, I know that you invested in our latest Bridgepoint Europe VII fund, half of the revenues of Bridgepoint Europe VII companies are generated in the United States. We're going to benefit from this growth too, even though we're described as a "European private equity" fund. I think the other positive effect on European private equity of Trump's election is that American growth is the positive wind. I go to the United States regularly, and you can feel that there's a positive wind, there's an attitude, much more so than in Europe. M&A is going to pick up again. I think that selling our assets to American buyers is going to be very attractive over the next two or three years. So I think this will facilitate our exits and probably increase the value of our exits. In that case, it's going to be positive.
When you look at the statistics, private equity transaction volumes in 2022-2023 are down from their peak by around 40%. There has been a macro impact on the market, with far fewer transactions. Now, it's not uniform; it's had a much greater impact on large-cap funds, because the IPO markets were totally...are still totally closed. So you couldn't sell, and debt was no longer available for large transactions.
Xavier Robert: Bridgepoint is a mid-cap fund. So it affected us less. We continued to invest quite well. In fact, we invest two to four billion euros in private equity in those years. And 2024 is one of our record years in terms of sales, exits and distributions to LPs. So that's the macro-economic context that hasn't been very favorable. Now, when you look at the best funds, I'm going to put Bridgepoint among the best funds. In fact, the whole strategy that I try to develop as Chief Investment Officer is this decorrelation between macro and fund performance. So, if you look at the performance of a Bridgepoint fund from 2020 to 2024, we grew our portfolio by an average of 20% a year over the period. And we do this because we're not at all a proxy for European growth, because we're going to select the sectors, not even the sectors, but the sub-sectors in which we want to invest. I think that the current years are good years for investment because, as we're at the bottom of the cycle, we're able to enter into transactions at lower prices, and I think that 2023, 2024 and 2025 are going to be very good years in terms of return on investment.
Xavier Robert: Yes, she's back at it. So I'm much more positive. We were talking about volumes, about the drop in volumes. I'm much more positive today. We've already seen that in the second half of 2024, when business started to pick up again, and I think 2025 will be even better. So we can see business starting to pick up again. The debt market has totally reopened, so you can perfectly finance your acquisitions, even for Large Cap companies. The market is totally available today, and we can clearly see business picking up again. I think this is also due to the fact that the gap between prices, between what sellers want and what buyers can pay, has narrowed. As people are feeling a little more positive, buyers are paying a little more, and I think sellers have realized that they have to sell. You can't stay, when you have a private equity fund, you have to sell the companies at some point. You can't stay five years without doing anything. So that gap has narrowed, and I think that as a result, a lot more transactions are going to happen.
Damien Hélène: Xavier Robert, Bridgepoint's Chief Investment Officer. His full analysis will soon be available on our website in the Altaroc TV section.
