Private equity: an engine for growth
Not everybody is friends with the potential next President of Russia, the Crown Prince of Abu Dhabi and the Prime minister of Malaysia. The man who spoke at the Alfi Global Distribution Conference in association with NICSA & HKIFA in Luxembourg certainly is. His name is Gérard Lopez and he is an entrepreneur always on the lookout for opportunities; selling Skype was one of them. He has also made a name for himself as Renault Formula One team owner.
“One of the reasons why we are attracted to Formula One is its global reach, most importantly its growth pattern. We don’t see growth in Formula One in Belgium or in France or any historic countries. We see growth right now in China, India, Brazil, obviously the US, but most importantly where we care is the BRIC-countries (Brazil, Russia, India, China)”.
These are the words of Gérard Lopez, Managing Partner at Mangrove Capital Partners, based in Luxembourg. He admits that his company is using the Formula One circus as a socialising platform to do business. According to Mr Lopez, Formula One is an ideal “vehicle” to meet politicians, business partners and other interesting people.
He adds that it is hard for other sports to compete against Formula One with its two billion aficionados and its 20 races per year. For Lopez, this sport makes more sense than the Olympic Games or the Football World Cup, which only happen every four years. The Renault Formula One team owner employs more than 500 people to keep the engine roaring, the annual budget dedicated to this racing is around 250 million dollars.
His entrepreneur story is an exciting one. Gérard Lopez said during his keynote speech at the Alfi conference that he never gets bored. When starting one thing, he already thinks about the next opportunity. “In anything I do, almost anything I do, at a certain point I seek fort an exit for me and my partners”.
Gérard Lopez confesses that he is more comfortable talking about private equity than about himself. He is Managing partner of Mangrove Capital Partners, which provides venture capital to Internet or software companies. Skype was one of the success stories, but not the only one as he underlined during his speech. He is also founder and chairman of Genii Capital, a kind of investment bank, which is into real estate, technology, automotive, clean tech and energy.
The Luxembourg born entrepreneur deplores that “quoted companies tend to become more and more disconnected from the market cap.” He adds that financial indexes do not provide a real view of the market. Gérard Lopez underscores this analysis with one of his many trips abroad. “When I was in Brazil 3 or 4 weeks ago, the Greek and the Brazilian Index had pretty much lost the same thing since the beginning of the year.”
With due respect to his friends in Greece, he says that you cannot compare both economies. So there is something wrong when speculative capital is dominating market movements and where the inherent value built in countries is not always reflected in the different indexes.
At the same time, the default rate, meaning the closure, of quoted companies is three times higher than that of private equity backed ones. Gérard Lopez profits from the occasion to underline that private equity is certainly not the root of the current problems; the default rate of PE-backed companies during the financial crisis was around two percent, while that of listed companies was over 6%.
Even though private equity is not directly affected by market cycles, institutional investors keep moving away as soon as things get ugly. Mr Lopez regrets that the message hasn’t come true yet, namely that private equity is about growth, job creation and intellectual property. CW