Back on the event program
The conference was preceded by a networking evening while there was also the possibility of staying on for a day on the golf course. The purpose of this forum was to create ties between French private equity firms used to working with SMEs and Swiss business leaders interested in learning more about how to pass on their companies and bring in outside shareholders.
Five experts from our Group took part in the conference. The day itself was structured around two round tables, and there was a range of workshops from which participants could choose. An overview of the Swiss economy was provided by Bruno Jacquier, chief economist of Edmond de Rothschild (Suisse) SA, focusing on Switzerland’s advantages for investors and outlining the possible drawbacks.
The first round table
The first round table, in which participated Nam Metzger and Antoine le Bourgeois of Edmond de Rothschild Investment Partners, discussed the ways in which private equity and SMEs can make contact and join forces. Many Swiss SMEs are owned by founding families in their second or third generations. They are not used to having an outside shareholder. To attract private equity investments, such companies must offer a clear-cut strategy and market position. Private equity firms want to see a business plan, based on a specific framework and financing blueprint, that converges with their own interests.
These investors pay particularly close attention to management and strategy as well as to valuation, which must correspond to future cash flows, and the state of the competition. Private equity firms are very stringent in deciding where to invest. It is said that for 250-300 requests analysed, only 5 are typically selected. The application itself therefore must be rock solid, and personal contact also plays a huge part in the process.
The second round table looked at living with and parting company with a private equity investor. When a firm buys into a company, it obtains a seat on the board, and there are clear rules governing its specific entitlements. In addition, the business gains an associate who can work alongside it and who is able to ask the right questions, potentially leading to better value creation. But having this outside shareholder also results in new reporting requirements. And the exit terms must be clearly stated from the outset.
The workshops looked at more technical questions. Gilles Panchard, a financial planner at Edmond de Rothschild (Suisse) SA, talked about estate planning in the context of corporate ownership succession. Julien Pitton, an assistant managing director at Edmond de Rothschild Corporate Finance, gave an overview of the liquidity restrictions connected with equity holdings in unlisted family-owned companies. Other workshops looked at the legal considerations and points that must be taken into account when planning transfers of incorporated companies, and the main risks and challenges arising from such transactions.