International Corporate Finance

Leaders League. Montefiore Investment

celebrated its tenth anniversary in 2015.

What made you set off on this adventure?

Éric Bismuth. In 2005, I had been a Ma-

naging 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 prac-

tices. 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 compa-

nies a deep sector expertise, a true entre-

preneurial spirit as well as strong strategic

and operational support. I invited Daniel

Elalouf and Thierry Sonalier, now Chair-

man 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 abi-

lity to better identify strategic opportu-

nities and help implementing them. Our

ambition is to enable entrepreneurs who

choose us to change their company’s des-

tiny. We help them constantly improve

their performance and the fundamentals

of their group. We have refined and vali-

dated this different operating model, in-

vestment after investment. The resulting

growth and ROI now show that it is effec-

tive, 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 prac-

tical 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 de-

cisions 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 competen-

cies. Also, we master well the digital trans-

formation, which has been on top of our

agenda in the past ten years. In addition, we

share our know how on stimulating top line

growth through multiple levers like product

innovation, marketing, distribution or pri-

cing. We are willing to invest for the medium

and long term.

Leaders League. Do you also rely on ex-

ternal 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 comple-

mented by organic growth. A build up must

reinforce the core of the activity of a com-

pany rather than dilute it. The success of an

acquisition is ultimately more random than

organic growth. The ability to extract syner-

gies and integrate teams is among the many

variables that may deter us from an acquisi-

tion. We do not believe in size, we believe

in strength.

Leaders League. What about internatio-

nal growth?

E. B. In many cases, international organic

development costs much more than acqui-

ring. 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. Mana-

gers 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 transac-

tions. While the market average debt is

around four times EBITDA, we go for an

average at 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 fu-

ture performance.

A BUILD UP SHOULD

REINFORCE THE CORE

OF A COMPANY’S

BUSINESS RATHER

THAN DILUTE IT

ERIC BISMUTH

CEO,

MONTEFIORE INVESTMENT

AN OPERATION IS A

LONG-DISTANCE RACE,

NOT A SPRINT