By Melvin Bergeret, Bilal Chihuailaf, Arthur Delfour, Agathe Melhem, Clément Melusson, Axel Nkam, Victor Zheng (ESCP Business School) & Devina Aggarwal, Atin Narain, Omar Ali, Nathaniel Matthew and Shreyas Mehta (Yale University)
Photo: Samson (Unsplash)
Overview of the deal
Acquirer: Eurazeo
Target: Eres Group
Total Transaction Size: €600m (20x EBITDA)
Closed Date: (not closed) announced on April 22nd, 2024
Target Advisor: Cambon Partners
Acquirer Advisor: Wil Consulting and FIG Partners (corporate finance), McDermott Will & Emery
Eurazeo has announced its acquisition of Eres Group following an exit from IK VIII fund managed by IK Partners. The financial details of the deal will remain confidential until the deal closes. Eres stands as a prominent French independent entity specializing in advisory, structuring, asset management, and the distribution of employee profit-sharing plans, retirement schemes, and employee shareholding plans. Eurazeo, a leader in the financial services industry, has invested nearly €3 billion in over 30 companies at various stages of their lifecycle. Eres has achieved remarkable growth, driven by a strengthened commercial team and successful acquisitions. The company has seen its assets under management soar from €2.4 billion to €6.7 billion, reflecting an impressive annual growth rate of 23%. Eurazeo's impeccable expertise in venture, growth, and buyout, combined with its extensive industry knowledge and significant connections in the financial services sector, positions it as an ideal partner for Eres. Since its acquisition by IK Partners, Eres has demonstrated an extraordinary growth trajectory. Joining Eurazeo's dynamic and transformative environment is expected to further enhance Eres' growth prospects within the French fintech sector.
We have been tracking the Eres opportunity for a long time and are impressed by the growth trajectory of the company over the recent years. We are convinced that the group has tremendous potential across its core market and adjacencies, both organically and through M&A.” - Maxime de Bentzmann, co-head, mid-large buyout, Eurazeo
Company Details (Acquirer - Eurazeo)
Eurazeo stands tall as a global investment powerhouse, overseeing a diverse portfolio with €35.0 billion in Assets Under Management (AuM) as of December 31, 2023. With €24 billion dedicated to serving institutional and private clients across various investment strategies, including private equity, private debt, real estate, and infrastructure, Eurazeo exemplifies a commitment to nurturing growth and innovation at every turn.
In an ever-evolving business landscape, Eurazeo emerges as a trusted ally, guided by a bold vision, unwavering dedication, and exemplary leadership. From fostering the growth of budding startups to fortifying established multinationals, Eurazeo's ethos centers on championing visionary entrepreneurs and empowering emerging talent. With a team of over 400 passionate professionals and a global presence spanning 12 offices across Europe, Asia, and the United States, Eurazeo is primed to unlock opportunities, navigate challenges, and catalyze meaningful growth for companies worldwide.
Founded in April 2001, headquartered in Paris, France
CEO: Christophe Bavière, William Kadouch-Chassaing
Number of employees: ~400
Market Cap: $6.12 billion
EV: $6.91 billion
Recent Transactions: BMS Group (2023), CTN Groupe (2023), Planet (2021)
Company Details (Target - Eres Group)
Eres Group is France’s leading independent advisor, structurer, asset manager, and distributor of employee savings plans (PEE, PERECO), pension schemes (PER), and employee share ownership plans. The company distributes its products through a network of over 6,600 distributors, targeting both mid-sized companies and large groups. Eres Group's prominence in the French market is demonstrated by its significant growth in assets under management from €2.4 billion in 2018 to €6.7 billion in 2023. Eres has been able to capitalize on the growing demand for employee financial participation schemes in Europe, bolstered by favorable regulatory changes and a growing awareness of the benefits of such programs among employers and employees alike.
Founded in 2005, headquartered in Paris, France
CEO: Mathieu Chauvin
Number of employees: n.a
Market Cap: n.a
EV: €600m
LTM Revenue: n.a
LTM EBITDA: €30m
LTM EV/Revenue: n.a
LTM EV/EBITDA: x20
Projections and Assumptions
Short-term consequences
Eurazeo's acquisition of a majority stake in Eres Group marks a strategic expansion in the financial services sector, specifically in profit-sharing and retirement schemes. This deal comes at a time when the French fintech market is experiencing robust growth. Eres has shown significant progress, tripling its size under IK Partners' ownership from 2018 to 2023, with assets under management growing from €2.4 billion to €6.7 billion.
This acquisition is expected to enhance Eres' growth through strategic support from Eurazeo, leveraging their expertise and resources to strengthen Eres' market position and expand into adjacent markets. The deal underscores Eurazeo’s commitment to investing in high-growth sectors, particularly in financial services, where they have a strong track record.
For Eurazeo, this investment aligns with their focus on companies with substantial growth potential, driven by structural market trends and the increasing demand for sophisticated financial solutions. The acquisition is anticipated to lead to further consolidation in the sector, fostering innovation and competitive offerings in profit-sharing and retirement schemes.
Long-term Upsides
The long-term benefits of Eurazeo's acquisition of Eres Group are numerous. By adding Eres Group to its portfolio, Eurazeo is not only expanding its reach in the financial services sector but also positioning itself to take advantage of ongoing market trends. The expertise Eres brings in employee shareholding and savings plans can help Eurazeo diversify its offerings and enhance its service portfolio. This is particularly valuable in a market where demand for comprehensive financial solutions is on the rise.
The acquisition opens doors for international growth. Eres Group has a solid reputation in Europe, and under Eurazeo's ownership, it can leverage this to explore new markets. This international expansion can help mitigate risks associated with economic fluctuations in specific regions, providing a more balanced and resilient business model for Eurazeo.
The deal is also expected to generate significant synergies. By combining their operations, Eres and Eurazeo can achieve operational efficiencies and cost savings, which should enhance profitability over time. These efficiencies might come from streamlined processes, technological advancements, or better resource allocation, ultimately improving the bottom line.
Moreover, this acquisition aligns perfectly with Eurazeo's commitment to sustainable and responsible investment. Eres Group's focus on employee ownership and financial well-being fits well with Eurazeo's ESG objectives. This alignment not only boosts Eurazeo's appeal to socially conscious investors but also contributes to its long-term sustainable growth, creating a positive impact on society and the environment.
Overall, while the short-term gains are evident, the long-term upsides of this acquisition are profound, promising sustained growth, innovation, and resilience for Eurazeo in the competitive financial services sector.
Risks and Uncertainties
Eres has delivered impressive growth over the past few years, its assets under management increased from €2.4 billion in 2018 to €6.7 billion in 2023. While this trajectory is impressive, it is essential to consider the dynamics of the retirement schemes market in France.
Retirement schemes are typically targeted at large companies. While gradually expanding into small and medium enterprises, this segment remains smaller compared to the market of major corporations that offer more lucrative opportunities for firms like Eres.
The France market for retirement schemes is at risk of becoming saturated, notably when considering the key players in the industry like BNP Paribas Epargne et Retraite Entreprises (€27.8 billion in assets), Natixis Interépargne (over €35 billion in assets), and the market leader Amundi Epargne Salariale & Retraite (€83 billion in assets, holding 46.7% of the market share).
Eres, with its €6.7 billion of assets under management, is relatively small. This presents operational risks as they may encounter difficulties in sustaining its aggressive growth it has experienced between 2018 and 2023 as the market slowly reaches saturation.
The regulatory landscape poses significant risks to Eres, especially with recent and forthcoming EU and French regulations impacting employee profit-sharing, retirement, and shareholding plans.
The Sustainable Finance Disclosure Regulation (SFDR), refined in January 2023, requires Eres to disclose detailed sustainability risks in their investment decisions for retirement and savings plans. This increases compliance costs and administrative burdens, with severe fines for non-compliance.
The Digital Operational Resilience Act (DORA), to be fully implemented by January 2024, mandates robust IT and cybersecurity measures to protect sensitive client data. This necessitates significant investment in upgrading Eres’ systems, crucial for managing extensive employee and retirement plan information.
Enhanced ESG reporting standards, effective in 2024, demand thorough sustainability assessments. Eres must re-evaluate its investment portfolios to comply, potentially shifting from high-return assets to sustainable options, impacting profitability.
Additionally, French pension reforms expected in 2024 could introduce stricter guidelines on pension fund management, affecting Eres’ retirement plan offerings and operational flexibility.