Focus on the new co-investments of Vintage Altaroc Odyssey
Summary
Written transcription
Damien Hélène: Hi Claire, you're in charge of reporting and ESG at Altaroc.
Claire Peyssard: Hello Damien.
Damien Hélène: So, as Louis mentioned earlier, we've been very active in terms of co-investments in 2024, with ten co-investments made. Can you tell us about these ten companies?
Claire Peyssard: Yes, so in fact we've made ten co-investments in the space of a year. We've been very active, as you said, and that's very good news, because it means that our investors' capital is being put to work efficiently. We have now completed 100% of the co-investments for Vintage 2021 and 2022. We have completed five of the six target co-investments for Vintage 2023, and we have already signed a co-investment for Vintage 2024. I think we'll be coming back to this, which is very good news. We'll see, these are very high-quality companies.
Damien Hélène: Many of these companies operate in the enterprise software sector, which is of particular interest to us. Why this choice of sector?
Claire Peyssard: Of these ten new co-investments, five are in the enterprise software sector. We are making these five co-investments alongside five different managers, all of whom have built up highly differentiated expertise in supporting software companies. So why have we chosen this segment as one of our favorites? Because it presents some very interesting characteristics for investors. The first characteristic is that this is a segment that is structurally growing fast. We're seeing double-digit growth, sometimes around 20%, both organically and through acquisitions. That's the first characteristic. And with the development of Artificial Intelligence, this growth potential is considerable in the medium term. The other very interesting point is that, once the software has been developed, additional functionalities can be added at a much lower cost than the initial development of the software brick. So, in fact, these functionalities can be invoiced to customers. So, since the cost is lower than the initial cost, the potential for increased margins is significant. We're in a highly resilient segment. Why is that? Because, in fact, these enterprise software solutions are truly critical for users, even in less buoyant economic contexts. For example, if we take an ERP in a period of economic slowdown - an accounting ERP, for example - it will become all the more necessary and important as the company's shareholders will demand figures and data to understand what's going on inside the company. So we're talking about indispensable solutions, which are also highly resilient, even in times of economic slowdown, let's say a more complicated macro-economic context. We're also working on solutions that are sometimes even essential for compliance software, as you know that the weight of regulations is increasing, and that some of these solutions meet these regulatory challenges. Another feature is that most of these solutions are billed on a subscription basis. This means we have a great deal of visibility, since customers pay monthly. So, in fact, we have a great deal of visibility over the revenues generated by companies in this segment. And finally, as I said earlier, we're really working with managers who have built up considerable expertise in supporting these companies, so they know how to achieve external growth and improve margins. And that's a real asset for the value creation these companies will generate.
Damien Hélène: So you wanted to present five co-investments.
Claire Peyssard: We actually have five companies in this segment. The first is Zellis. It's one of the UK's leading payroll and HR management companies. It's a British company. Every month, 5 million British employees use Zellis software to receive their pay slips. That's impressive. We have another company, also based in the UK, which makes both payroll and HR software, as well as accounting ERP. It's called Iris. It is present in the UK, but also very much in the USA. Iris already has over 120,000 customers, and is growing by around 20% a year. That's impressive. It also has a strong capacity for successfully integrating companies, having made more than eight acquisitions in recent months.
Damien Hélène: So that's impressive.
Claire Peyssard: In Vintage 2023, we have a company called Kyriba, which is a bit like the CFO's office. In fact, Kyriba's solutions enable us to manage payments, cash investments, working capital requirements and financial risks. So these are really essential solutions for CFOs. The company is based in France, but is also completely international. It handles over 3.5 billion banking transactions and over $15,000 billion in payments every year.
So the last two co-investments in the B2B software sector are Qlik and AMCS. Qlik, we're lucky enough to have a video from its CEO later on. AMCS is in a fast-growing sector, the circular economy. We're in a market that's growing at around 12% a year. So what does AMCS do? Its ERP enables us to manage all recycling-related processes, from the collection and sorting of materials to their recovery, all while optimizing energy efficiency and reducing costs. So we're really in a booming market. AMCS has become a leader in this market. It is present on three continents, with over 5,000 customers and some prestigious clients. For example, Volkswagen, Bosch and Arcelor place their trust in AMCS.
Damien Hélène: So Claire, finally, 50% software exposure for our last ten co-investments is totally in line with our target exposure to these sectors. Among the five remaining companies, is there a sector that particularly stands out?
Claire Peyssard: Yes, Damien. We have three companies targeting the business services sector, which is also one of our strategic target sectors. So I'll introduce these three companies briefly. The first is Evoriel. Evoriel is a co-investment opportunity we had with Bridgepoint. Evoriel used to be called Nexity-ADB and was the division of Nexity that manages condominiums and rental properties. And what's interesting is that we're not in a cyclical business like real estate development. We're in a business that is, I'd say, around 75% recurring revenue. So it's nothing like what you find in real estate development. What's also very interesting about Evoriel is that Bridgepoint has worked very successfully with Foncia, one of Evoriel's competitors in the French market, and also one of the leaders. Bridgepoint will therefore be able to apply to Evoriel the recipes it successfully implemented at Foncia, notably in terms of external growth and margin improvement. The second company is Howden. Howden was an opportunity we had with HG Capital. It's a company that specializes in insurance brokerage. It was founded in 1994 in London, but has in fact grown very quickly, and is now one of the world's leading insurance brokers. In fact, its organic growth has outstripped that of the market as a whole, and it has also succeeded in integrating a large number of companies, giving it a great capacity for external growth. So today, Howden is present in over 50 countries, and still has very significant development potential. The third company is Veriforce. Veriforce is a co-investment with Apax. Veriforce is a world leader in certification, compliance and risk assessment. So, in fact, Veriforce has designed a platform, which companies subscribe to, and which gives them access to compliance audits of their suppliers and service providers in 140 countries. It's a very important platform in terms of data. And, of course, we're in a booming market due to the increasing weight of regulations. But what makes this operation so interesting is thatApax has another company in its portfolio which operates in the same risk assessment segment, but which is more focused on prevention and anticipation. This company is called Alcumus, and as part ofApax's value creation strategy, it is going to merge Alcumus and Veriforce to create a leader in the entire value chain, from risk anticipation to risk auditing. This means we'll have a truly key player in this market, and we're naturally aiming for growth of around 20% a year.
Damien Hélène: So, Claire, if I'm counting right, there are still two companies left. Are these also in a similar sector?
Claire Peyssard: The two companies I'm going to talk about now are Thoughtworks and Adevinta. They both come from what we call P2P, Public to Private, operations, which in fact consist of private equity players buying up companies on the stock market that were poorly valued by the financial markets because they were misunderstood. We bought into these two companies at a significant discount, at around 50% below the maximum historical price. So it's still significant. In the case of Thoughtworks, one of the leading players in digital transformation consulting, the delisting was carried out at a very attractive valuation, and the manager, Apax, will now be able to implement an ambitious value creation plan without the pressure of the financial markets. So what will this mean? It will mean redefining the company's strategic priorities, introducing new management and optimizing costs. And it's all going to be much better done outside the stock market. Adevinta. Adevinta operates over 25 digital marketplaces in Europe. These are leading marketplaces, such as Leboncoin and L'Argus in France, which are truly benchmark players. Every month, these marketplaces attract more than 2.5 billion visitors, and have more than 120 million regular visitors. That's quite a lot. And like Thoughtworks, Adevinta was a player that was very poorly valued on the stock market. And now we're working with a manager, General Atlantic, who has successfully supported numerous players in the world of digital marketplaces. And we're convinced that he's the one who'll be able to add value to these very fine assets. Perhaps with strategic divestments in blocks. So, here again, we're dealing with a player that private equity managers will know how to value much better than the financial markets.
Damien Hélène: So Claire, do you see any other common points in these co-investments than those Louis mentioned earlier?
Claire Peyssard: Yes, then there's another point in common, which is that, in eight out of ten cases, the financial sponsor of the transaction, the manager who offered us co-investment, had controlled the company for several years. So, he already knew the company in depth before we co-invested. And what's very interesting is that one of the main risks in LBO operations is the first six months. In fact, this is when you can discover things you didn't necessarily see during due diligence. And so, in eight out of ten cases, we have eliminated this risk.
Damien Hélène: Thank you very much Claire, that's fascinating. Now I'd like to take it a step further: 2 inspiring CEOs have opened the doors of their offices to us. Jean-Mathieu Biseau, CEO of Opteven, one of Europe's leading providers of mechanical breakdown cover. Opteven has 1,000 employees and is forecasting sales of 330 million euros in 2024. We co-invested in this Lyon-based company in our Vintage 2021. Mike Capone is CEO of Qlik, a comprehensive data management platform. The company is valued at $10 billion, with sales of $1.5 billion in 2024. This is a co-investment in our Vintage 2024. What do they have in common? Altaroc has co-invested in their business, and they're both experiencing remarkable growth. Let's hear it.
