A Capital investment fund for regional SME's

Viveris Management and Connect Gestion have just launched "Connect Capital ", a capital investment fund amounting to 30 million euros. Due to its specificity, this resource is most original and even unique, because it will take
majority participations, of 50 or 51 %, in SME's situated in the southeast quarter of France, stretching from Lyon to Montpellier. Indeed, Connect Capital will invest in stockholders' equity through operations of capital transmission, bringing in an outside buyer (LBI: Leveraged Buy In) an internal buyer (MBO: Management Buy Out) or allowing the director to stay at the head of the business (OBO: Owner Buy Out).

An original initiative in many respects " The idea, came from a certain number of managers in our region, faced with the problems of transferring professional patrimony that many managing directors encounter on approaching the age of retirement, or simply the desire of some to take advantage of this type of decision to participate by grouping with others, or by buying to constitute a larger company, but who often lack the necessary financial means to do so" Jean Pierre Barade, the President of Connect Capital explains to us. " But the real originality of this fund is that it is based on a synergy of competence of a multiregional administrator of capital investment funds, Viveris Management, and of two experienced company managers, Jérome Borie, one of the founders of Future Telecom and Franck Paoli, both collaborating within the company Connect Gestion" he adds. Without forgetting that this synergy is reinforced by the strong implication of about forty regional company directors from very different sectors of activity. Naturally these "Sponsor Founders" bring their competence and their expertise, but that is not all, as Jean Pierre Barade explains: " In order to constitute the Connect Capital fund, the participants paid out between 200,000 and 500,000 euros. It enabled us to gather 6.7 million euros, plus the capital and banks that followed, bringing the sum to 27 million euros at the end of September, while we foresaw 30 million euros for the end of December 2007." Furthermore, the commitment of these "subscribers" is a wager of seriousness and especially of efficiency, because if they invest, it is because they intend to gain profit. These criteria determine the choice of the companies that will be selected to have access to this fund, for sums that can vary from 3 to 4 million euros, once the committee of investment has given its agreement. Indeed, as Jean Pierre Barade explains, the selection will be tough: "The companies we target must generate between 10 and 20 million euros of turnover and show profitability between one and three million euros, no more, but that's quite considerable. We would not have sufficient means above that amount. However, the capital investment fund will examine companies in all fields of activity, and on strong markets to have a chance to develop them. Because it's good to save a company, but it's even better if we can build its future. These sums can be considered as being too high for companies of our region. Nevertheless, although it is difficult to find companies of a certain size in our region, there are some that have an interesting profitability. But it is imperative to fix figures and limits, because if somebody comes with a company that makes 5 to 6 million euros, it will be necessary to invest to develop it. It is not our prime objective, even if we create a second fund for this purpose within two or three years when we have exhausted our stock. On the other hand, we are interested in a company that makes 600,000 euros, because it has so much potential that it will certainly produce one million euros of results within two years. If the investment committee has chosen this limit it is only because it is our very first capital investment fund and we want to secure it by minimizing the risks. On the other hand, it is not excluded that a company in a determined sector, (we have three in mind), making less than one million euro, in partnership with others and by creating synergies, could lead to a company making two to three million euros of results. Because, with our fund, we have the possibility of gathering together complementary companies to create sound values with results which follow," adds the president J.P. Barade.

Precise objectives

Connect Capital will be interested in unquoted companies on a presently strong market. Indeed, the market of the transmission of companies by LBO is growing durably; 30 operations of this type are registered every year in the southeast quarter of France, among SME's with a value between 3 and 15 million euros. Furthermore, these companies constitute the least competitive capital investment market sector, which represents the highest potential, and there remains a weakly structured market. This is indeed a chance for this new fund and an excellent opportunity for all its participants, as for the Investment Committee presented to us by its president Jean Pierre Barade: " It is composed of eight persons: Thierry Blondel, Executive director de Viveris Management, Jérome Borie, Head office of Connect Gestion, Serge Lebourgeois, President of Illis Consultants, Franck Paoli, Head office of Connect Gestion, Marc Santoni, lawyer at the bar in Paris, Eric Schettini, President of Viveris Management, Théodore Zarifi, CEO of the Roman Boyer investment trust, and myself."