Since its creation in 2006, this flash sales website has become one of the greatest digital success stories in France. It was also hailed as such on its stock market listing in October 2015, on the Paris Stock Exchange Eurolist B. In a hardly favourable environment, Showroomprivé.com “convinced investors by its company strategy, the good state of its fundamentals and its ability to deliver the projects presented”, explained David Dayan. Since then, showroomprivé.com has continued on the same course, embarking on the acquisition of Italian company Saldiprivati.
Thierry Petit and David Dayan - © Showroomprivé.com
The manager/ capital-development fund duo
In the past, Showroomprivé.com has already shown that it can convince investors in another area: private equity funds. In 2010, it caught the attention of a prestigious US finance company. Under the aegis of this partnership, showroomprivé.com accelerated its international expansion and developed new offerings: delivery within 24 hours, mobile apps, multi-currency website, etc.
"Accel Partners ‘challenged’ us in our strategy and our growth plans, and supported us without ever interfering in the management of the company. This is how we brought about the successful combination of manager and investor."
For this combination to succeed, the relationship has to be well-structured. This is reflected in the shareholder agreement, which governs the rights and obligations of all the parties involved. “In this regard, two clauses call for particular attention: the one relating to governance, and the one relating to exit”, indicated Jean-Robert Bousquet, partner-lawyer and joint head of the Corporate - Mergers/Acquisitions department at the firm CMS Bureau Francis Lefebvre. By its nature, the fund invests in order to divest “one day” - the average investment term is currently evaluated at six years by the French private equity investors’ association AFIC (Association française des investisseurs pour la croissance). “It is usual to set a deadline for exit, to agree on a mandate for a merchant bank to organise the sale process or to plan a stock market listing”, he added. Investors also know how to play the flexibility card.
As well as these traditional liquidity clauses, the fund may grant the management a pre-emptive right, if it is the majority shareholder. Investment funds are pragmatic: they know very well that you don't want to set a company against its management team.
Increasingly flexible financing solutions
Showroomprivé.com is different from many other companies because it generates a negative WCR. “We do not face any structural issues on the financing front. On the other hand, in the past, we have considered the opportunity to buy out a competitor of the same size. We therefore looked at all the flexible instruments available on the market”, said David Dayan.
In the area of non-dilutive financing, the scope has become increasingly wide over the last few years.
In the area of non-dilutive financing, the scope has become increasingly wide over the last few years. ”Previously, the only solutions available to companies in terms of long-term financing were banking loans payable in instalments. Today, they are faced with a vast array of flexible solutions, redeemable at maturity. As well as various forms of mezzanine loan (with cash and/or capitalised interest) there are the well-known unitranche loans, which replace all the debts on the balance sheet”, commented Grégory Fradelizi, Head of Financing Advisory Services at Edmond de Rothschild Corporate Finance.
In today's world, it is the financing solutions that are adapted to the company and its growth plans, and not the other way around.
This trend has been sustained by the development of debt funds in the face of traditional banking establishments. “These private debt funds, often based in London and having considerable financial clout, are actively seeking to finance French SMEs. Do not imagine that we are talking here about large facilities: these operators are able to fulfil requirements in the region of €25M”, he added. Although banks and debt funds have been in opposition for a long time, we are now seeing these two families co-existing quite happily in borrowers’ balance sheets. The result? Companies have never enjoyed so much liquidity.
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