On July 14, 1789, the citizens of Paris stormed the Bastille prison to gain access to a government cache of ammunition. The French Revolution was sparked, and the history of the world would never be the same.
But why were the Parisians so upset? Among their numerous grievances was that the nation’s rulers had spent much of the past century overloading the country’s balance sheet with outrageous amounts of debt used to finance a series of wars and the construction of the palatial estate of Versailles.
It’s safe to say Maximilien Robespierre, Georges Danton and the rest of the revolution’s leaders would have been no fans of the modern LBO.
Leverage is still a major factor in the France of today, more than two centuries later—although now it’s used by private citizens to buy and develop companies, rather than by the government to bankroll foreign conflicts. In fact, outside of the U.S. and the U.K., few countries have so embraced private equity. Since 2010, France has been home to more private equity activity than any other nation in continental Europe, according to the PitchBook Platform, besting second-place Germany by more than 50%.
PE activity in France by industry sector
For the most part, those deals represent French firms investing in French companies. The top 10 investors in the country since the start of 2010 are all also based in France, led by Siparex Group. CM-CIC Investissement follows closely in second place, with Bpifrance and FSI Régions rounding out the top four.
Many of the largest LBOs in France over the past five years have been related to the telecommunications sector, with a handful worth more than €2 billion. Other major recent buyout targets include packacing producer Verralia, parking-facility operator Park Indigo and vinyl chemical company Kem One. For each of the past two years, B2B deals have accounted for slightly more than 40% of all activity in the country, with B2C making up roughly 25% and IT another 10%.
Some of those deals will work out for the investors. Others won’t. But it seems safe to assume that none will end as disastrously as things did for those who helped bury the nation under a pile of IOUs during the 18th century. Four years after the citizens of Paris stormed the Bastille, the king, Louis XVI, lost his head to the guillotine. Eleven years later, Napoleon Bonaparte was leading the French army across Europe.
Debt can be a powerful thing.