Eric Bismuth (Montefiore Investment): "A build up should reinforce the core of a company’s business rather than dilute it”
Posté le 15 déc. 2018
Leaders League. What made you set off on the Montefiore Investment adventure?
Éric Bismuth. In 2005, I had been a Managing Director of The Boston Consulting Group for eight years. The French Private Equity market was booming. I felt that most of the teams were using the same investment strategy, with the same practices. I decided to create a new investment firm that would have a radically different philosophy. While conducting rigorous investment processes, Montefiore would offer management teams and their companies a deep sector expertise, a true entrepreneurial spirit as well as strong strategic and operational support. I invited Daniel Elalouf and Thierry Sonalier, now Chairman of Jardiland, to join the venture.
Leaders League. How does this approach translate into action?
E. B. In additional to traditional private equity support, we bring to bear an ability to better identify strategic opportunities and help implementing them. Our ambition is to enable entrepreneurs who choose us to change their company’s destiny. We help them constantly improve their performance and the fundamentals of their group. We have refined and validated this different operating model, investment after investment. The resulting growth and ROI now show that it is effective, both for our entrepreneurs and for our investors!
Leaders League. Do you have favorite sectors?
E. B. We are true specialists in certain locally supplied services sectors. In practical terms, these include three macro segments: tourism/leisure, B2C services/retail, and B2B services. We really know these businesses very well, in France and in Europe. We can support companies with growth capital deals – generally as a majority investor – or through growth buyouts.
Leaders League. What are your first decisions when becoming shareholders in a company?
E. B. Once we are shareholders, we act as a catalyst for growth driven transformation. On average, our portfolio companies have delivered 15% top line growth annually, even though most of them were in market segments growing at zero to 3% during the same period.
Certain performance levers are similar across our portfolio companies. For instance, we invest heavily and upfront in strengthening the company structure and core competencies. Also, we master well the digital transformation, which has been on top of our agenda since inception. In addition, we share our know how on stimulating top line growth through multiple levers like product innovation, marketing, distribution or pricing. We are willing to invest for the medium and long term.
Leaders League. Do you also rely on external growth?
E. B. Acquisitions do contribute about half of the profitable growth of our portfolio companies. Nevertheless, external growth is not a strategy in itself, it must be complemented by organic growth. A build up must reinforce the core of the activity of a company rather than dilute it. The success of an acquisition is ultimately more random than organic growth. The ability to extract synergies and integrate teams is among the many variables that may deter us from an acquisition. We do not believe in size, we believe in strength.
Leaders League. What about international growth?
E. B. In many cases, international organic development costs much more than acquiring. Our team brings a lot of experience in this respect, with an excellent track record in making European, or even global, French companies that were purely domestic. Managers can tap on the depth of our experience, we share what has worked and what has not in similar situations.
Leaders League. So does this imply less leverage?
E. B. It does. We generally use moderate leverage when setting up our transactions. While the market average debt is around four times EBITDA, we go for an average of between 2x and 2.5x. This gives the company more flexibility and better ability to seize opportunities. An investment is a long-distance race, not a sprint. When we exit from a portfolio company, acquirers soon discover that our companies have much greater embedded growth than their competitors. That’s key for their future performance.
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