After more than twenty years spent at Intermediate Capital Group (ICG), the British investment company listed on London's Footsie, current CEO Christophe Evain is stepping down and handing the reins to Benoît Durteste. The latter will drive a firm in great shape: assets under management are up to €23.8bn (10% rise year-to-year) while group profits reached £252m (£159m in 2016)! It's hoped the new captain aboard will succeed in reinforcing ICG as a top capital markets and private equity player worldwide, while continuing affirm its European roots.
Dealmakers. A Frenchman succeeding a Frenchman at the head of a listed British company, that's not something you see every day.
Benoît Durteste. Apart from Xavier Rolet (London Stock Exchange), I must admit this situation is quite infrequent in Great Britain. The replacement of Christophe Evain is a well-planned process executed within a prepared timeframe. Christophe has been one of ICG's pillars for 23 years, almost since the creation of the group (1989). He has contributed to every development stage. As for me, with more than 15 years spent at ICG and several of those as a member of the executive committee, I certainly feel I have the necessary experience to take over as CEO, and of course the company is in great shape so I feel excited about the future.
Fifteen years in the same company is a long time. You certainly had other career opportunities. Why did you decide to stay at ICG and become CEO?
I feel very happy at Intermediate Capital Group and I actually never felt I should leave this company that has seen real growth over the past decade. It is very stimulating to work in such a dynamic environment. Plus, at ICG, there is a sort of perfect mix between structure – as a listed company on the FTSE250 – and warm atmosphere, where autonomous initiatives are fostered. Put another way, while there are some golden rules about good governance when you are a listed company, these do not weigh on our ability to be agile. Of course, my new role will entail less direct involvement in investment execution, however, I will benefit from a broader perspective of the business which is no less important as you deal with the underlying issues of the different activities.
Is your executive committee limited in order to preserve some kind of clarity on your objectives?
It is right to say that with only three people our executive committee is limited. It is not something absolutely necessary but I think it helps the company to keep a clear vision of the sky ahead of us.
Has this sky been clouded in any way by Brexit?
Well, Brexit did not have any consequence for ICG as an institution. Our business is still the same, our partners and shareholders (pension and sovereign funds) have held their position, and our investment vehicles are licensed all around the world. Of course, Brexit got us thinking about the potential impact on our portfolio companies or the ones we aim to attract, on the regulatory and economic sides (exchange rates, customs, etc.). For example, in the UK, we recently took over a domestic network of lodges and holiday homes (Park Holidays) that we perceive as a resilient business if the pound was to decrease in value. If this were to be the case, a lot of British people would think twice going abroad and spend their holidays in the UK instead. Personally, I think it is always unfortunate to leave a family, especially when the causes of such a departure are not clear. Brexit may not be a burden for the UK, but it will definitely not be a blessing.
Is your promotion a sign of strategic changes ahead or are you going to build upon what already exists?
With a growth rate still heading upwards, our priority is to keep developing our existing activities. By the way, I do not think I am the best person to question group strategy since I have been part of its conception as an executive committee member for years. We stay ambitious and proactive. Right now, we aim to launch a new fund dedicated to energy assets in Australia. The team is already in place and working on a couple of investment opportunities. We’ll likely use our own balance sheet for the first couple of acquisitions because that reassures investors that we have what it takes. Bringing on teams who have specific expertise is what differentiates us. We have found it is better to work alongside them than pretending we know everything about everything! As a consequence, investors are also more likely to subscribe to our funds if they know how we go about our work.
"I believe there is huge demand for a big player with a global footprint but European roots"
Our headquarters are located in London but we feel very European. It is not enough though because our clients are international and they increasingly ask for a bigger global footprint. Thus, we need to operate abroad even more. In our sector, American asset managers are said to be the most global providers even though it usually means they offer lots of America-based assets and a smattering of non-American ones. To sum up, I believe there is huge demand for a big player with a global footprint but European roots. In Europe, we know that a deal in the UK has nothing to do with a deal in France or Germany. I can tell you old story that is instructive: in the past, ICG was a shareholder of Picard (a frozen-food retailer) in France but before that happened, the deal had been submitted to our English teams and their first reaction was to refuse it. Because of a sharp cultural difference – they believed frozen foods was a bad business that nobody wanted – the deal could have been missed out on.
In any case, there is no way we would go somewhere without having a local team there. By that, we do not mean "close to" or "near" but we mean "exactly there." It takes a lot of time to settle. Latin America, Japan, we have been longing to grab a share of these markets but we never found the best configuration.
As a listed investor in London that's active in Europe, you remind us of 3i. Is that an accurate comparison?
We may seem similar but we are actually increasingly different since they unloaded their debt activity to InvestCorp. 3i had more trouble than us recovering from the financial crisis. They went through a hard restructuring stage and have had no fundraisings since then. Now, they only invest their own money while we still have both activities: third party management and self-investments when the right opportunities come along.
Investment strategies that relate to which fields?
On the one hand, we have corporate related activities (45% of AUM): debt, private equity and mezzanine. In this, we are active in Europe, the USA and Asia Pacific. On the other hand, we offer capital markets activities (25% of AUM) : CLO, high yield, etc. Typically, these products have higher exchange volumes, and thus better liquidity. This activity is not in Asia because the market is too complex and rapidly changing. In addition, we have a portfolio of real-estate assets (20% AUM), exclusively in UK, but which still carries €3.5 billion of assets.
Finally, we have a fund of funds business based in New York – where we back up LPs in the case of underperforming fund vintages – and a co-investment fund.
Regarding private equity in France specifically, there seems to be much liquidity, but with targets prices going very high. So what is the secret to nailing good deals?
It is not that simple because a great number of potential buyers often stack up around limited companies. However, I think the deal flow is fine and of high quality compared to what it was 15 years ago. If enterprise values are high, I do not think they are disconnected from stock markets. Before the crisis, private equity managers were used to paying more than the market value but this situation does not exist anymore. Today, you have plenty of deals that end up within strategic portfolios which shows how measured the market has become. Looking at the business climate, the economic and political signs are rather positive. I do not see a storm coming. Nowadays, you have institutional investors that pour an increasing amount of money into private equity because it has delivered around a 10% yield over the long run. What other asset class can say the same?
As for our way to get in, we have not found any magic recipe that the competition doesn't have, but we prefer firms with strong shareholders whether they are family or managers. Transactions with family offices are also on target. For investments in France, it is a mezz/equity european funds of €3 billion that we use (invested about 45% and 4 years left). Our portfolio here is composed of La Toulousaine or Charlois for instance.
Tell us about your latest innovation?
That would be the 12-month intern programme we established in London in order to hire bright graduates with high potential but with little or no experience and who may also come from disadvantaged backgrounds. The aim is to provide a meaningful work placement that provides that all-important first step onto the career ladder, with a view to them successfully transitioning into permanent employees. And it worked. 93% of these students have gone on to find employment, either with ICG or elsewhere.
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