Article

09.05.2016

Private equity: a versatile form of financing

Private equity can also be a convenient way for SMEs to strengthen their equity and finance their further growth. But how do you attract private equity investors? And how do they operate?

Private equity can refer to many things. Which investment techniques are involved in private equity and in which cases are they used?

Private equity

Private equity is an instrument used by FPE to acquire an equity interest in a company, either alone or together with other investors. This does not involve a passive investment, but active share ownership: the aim is to engage in a partnership in the medium or long term. In concrete terms, this means that FPE is represented on the Board of Directors as a minority shareholder and in that capacity provides strategic and financial guidance and/or further professionalization of the company.

After a few years, FPE will withdraw from the company again. How this happens exactly is decided in consultation with the co-shareholder(s). They can buy the interest from FPE, but FPE may also sell it to another private equity investor or industrial player.

A company may decide to attract capital for various reasons. A common reason is that the company seeks to finance growth by increasing its activities, internationalising or acquiring other companies. The advantage is that no new private funds or excessive leverage are necessary. Other options are a business transfer or a (partial) buyout of family or less active shareholders.

Venture capital

Venture capital, also referred to as start-up capital, is a form of private equity used to finance early-stage, high-tech companies. These are mainly innovative start-up companies with promising growth prospects. FPE mainly provides venture capital through investments in university venture capital funds.

Mezzanine financing

Mezzanine financing is a long-term subordinated loan for which the company is not required to provide any interim repayments, but makes one lump-sum repayment at the end ('bullet'). These factors mean that the risks of mezzanine financing are higher, which makes it more expensive than a conventional loan with a shorter term, a repayment schedule and securities.

The company does have to generate sufficient returns and liquidity in order to bear the interest charges. The total payment usually consists of a combination of the following elements:

  • Cash interest: Interest that is paid at regular intervals during the term.
  • 'Payment in kind' (PIK) interest: Capitalised interest that is not paid in cash during the term, but is added to the payable capital and repaid along with the principal.
  • Warrant: An instrument that entitles the provider of mezzanine financing to acquire a small percentage of the share capital later. This allows the provider to enjoy a variable payment too.

The exact relationship between these elements depends on the type of company, its future plans and the arrangements it has made with the financier. A company generating a lot of liquidity will be able to cope with a higher cash interest, while a company with a great need for working capital will tend to go for a higher PIK interest or more warrants.

Mezzanine financing is often used for companies facing a financing gap: an investment need that cannot be fully covered with capital or conventional leverage. A company can also opt for this form of financing if does not need external capital injection because there is sufficient equity present or because the company prefers not to open up the capital to new shareholders, for example.

Article

09.05.2016

Private equity in practice: Point Chaud

In April 2014, BNP Paribas Fortis Private Equity took a minority stake in filled rolls and pastry chain Point Chaud. Let us take a look behind the scenes of this transaction.

Point Chaud was established by CEO and reference shareholder Didier Depreay in 1993. Since then, the company has expanded to become the biggest filled rolls and pastry business in Wallonia, with about 400 employees and a turnover of €40 million. Point Chaud has about 40 branches in Wallonia and France, most of which are concentrated along the Namur-Liège axis.

Long start

In April 2014, BNP Paribas Fortis Private Equity (FPE) took a minority stake in the company. This transaction was the jewel in the crown of almost two years of preparatory work. Luc Weverbergh, Managing Director BNP Paribas Fortis Private Equity, explains:

“Our entry is the result of a shift in Point Chaud's ownership of shares. CEO Didier Depreay wanted to buy out some minority shareholders, but neither he nor the company had the resources to do so. When he presented this problem to his relationship manager at our bank, which has had Point Chaud as a customer for years, he was put in contact with our team immediately.”

It still took quite some time to close a final deal. This is absolutely normal, Luc Weverbergh adds:

“Our entry is always preceded by a preparatory process, in which we evaluate the strategic plan and the figures thoroughly. We also need to come to a joint vision for the future for the company. As part of this, we proposed to simplify the Point Chaud group's structure and give it a Belgian focus. This takes time. The minority stakeholders also had to be bought out in the best possible circumstances. It was a clear advantage that we could set up the transaction ourselves without any external pressure from a corporate financial advisory, for example. This allowed us to take our time in order to build mutual trust and get to know the company.”

Supporting future growth

This participation makes FPE an important minority shareholder of Point Chaud and allowed CEO Didier Depreay to become a majority shareholder. Finance group Meusinvest keeps a small interest in the company. Didier Depreay:

"When BNP Paribas Fortis Private Equity joins the capital, it will provide powerful leverage for expanding our activities in Belgium and beyond. I am pleased about this financial partnership, as it gives us the opportunity to accelerate our development and consolidate our structure and position on the Belgian market. It should also enable Point Chaud to conquer a bigger market share faster in regions where the brand does not have a presence yet in order to become market leader in the Belgian retail segment for filled rolls and pastries. We have concrete plans for a number of new branches in Wallonia and Brussels."

Why Point Chaud?

According to Luc Weverbergh, Point Chaud has exactly the company profile FPE is looking for:

"Our investment strategy focuses on high-performance, medium-sized companies in the Benelux region with a strong market position and major growth potential. Point Chaud fits this profile perfectly. It was also clear right from the first contact we had that our vision is fully in line with the CEO's, both in terms of the choice of new markets and the company's structure, growth strategy and even a possible joint exit. This meant that all the ingredients for successful cooperation were there."

Article

08.03.2024

Businesses stand to benefit from switching to electric and multimodal mobility

BNP Paribas Fortis is ready for the mobility of tomorrow. And Laurent Loncke, General Manager Retail Banking and member of the bank’s management committee confirms this when he says “We do much more than lease electric vehicles”.

How can companies leverage mobility as part of their transition?

"If we look at vehicle usage alone, switching from fossil fuels to electric energy can reduce CO2 emissions by a factor of four. This transition is being encouraged in our country more than ever by tax incentives and tax breaks. From 2035, the European Union will also ban the sale of cars with combustion engines. Whether it’s for the company fleet or company cars for employees, electric driving is the way forward, alongside other forms of mobility."

Are all businesses aware of this?

"These days, two out of every three new vehicles are company cars. And 80% of those orders are electric vehicles, a trend that is also apparent at our partner Arval."

So companies are playing a pioneering role in this transition?

"Certainly. First and foremost because former company cars find their way to the second-hand market at some point, making electric driving more accessible for everyone. Secondly, by choosing an electric car, you can encourage your friends and family to follow your example. Our recent Profacts survey (only in Dutch and French) showed that 85% of electric vehicle owners are satisfied to very satisfied that they switched to an electric vehicle. However, 42% of Belgians are still reluctant. Half of them are worried their battery will run out before they can get to a charging point."

Is their fear justified?

"Not really. Most drivers only feel comfortable with a range of 500 kilometres, even if they only drive a few dozen kilometres a day. It’s true the charging network does need to be developed further. Many people, especially those living in cities, cannot install a charging point at home. BNP Paribas Fortis is contributing to the expansion of the charging network through its participation in Optimile. This Ghent scale-up offers software solutions for charging electric cars and is developing strategic partnerships for the installation and maintenance of charging points."

Can an electric car be part of each employee’s remuneration package?

"Today, there are already less expensive vehicles on the market, making electric driving an option for middle and lower-management. The Total Cost of Ownership of an electric car is the most important factor, however. And this is still much lower than that of a vehicle with a combustion engine. Leasing is often the best solution. We have a comprehensive, tailor-made offering for all companies, regardless of their size and needs."

What exactly do you mean by a 'comprehensive offering'?

“In addition to leasing, we are able to offer charging solutions at home or at work, a charging card for public networks, the automatic reimbursement of electricity consumption at home, an app to find charging stations, and electric driving training through our many partners.”

So a complete ecosystem?

"We want to contribute to the mobility of tomorrow. By financing it, through credits or leasing, and with insurance, but also by working with partners outside our traditional activities. Like Optimile, and Touring, an organisation that is synonymous with reliability."

But mobility isn't just about cars, is it?

"We believe we need to rethink our relationship with the car. Given the climate targets and the increasing scarcity of resources, it is simply not possible to replace every internal combustion engine with an electric car at the moment. Arval offers its extensive expertise to companies considering a different approach to mobility. We help them analyse their needs, propose alternatives to the car, establish a mobility budget or draw up a mobility policy. We offer bicycle leasing, sometimes in combination with car leasing. We strongly believe in multimodality and mobility-as-a-service solutions: the option to combine different transport modes and pay for them without too much hassle. This is also one of the specialities of our partner Optimile."

Are companies and their employees open to this idea?

"The idea of employees no longer saying 'I have this amount for my car in my salary package', but rather 'I have this amount for my mobility'  is gaining traction. People are already paying for use rather than ownership in gyms or for streaming services. Mobility is going down the same route, with car-sharing and flat-rate subscriptions, making costs more predictable for businesses and private individuals. But the pace of change will also depend on the success of the federal mobility budget. For now, uptake is slow."

 

BNP Paribas Fortis SA/NV – Montagne du Parc/Warandeberg 3 – 1000 Brussels – VAT BE 0403.199.702 – RPM/RPR Brussels

Optimile SA/NV – Sassevaartstraat 46 bus 204, 9000 Ghent – RPM/RPR Ghent – VAT BE 0648.837.849 – www.optimile.eu – BNP Paribas Fortis SA/NV holds a greater than 10% stake in Optimile SA/NV.

Arval Belgium NV, Ikaroslaan 99, 1930 Zaventem – Brussels Register of Companies – VAT BE 0436.781.102.

Touring SA/NV, Koning Albert II-laan/Avenue Roi Albert II 4 B12, 1000 Brussels – Brussels Register of Companies – VAT BE 0403.471.401, is registered under this number with the FSMA, Rue du Congrès/Congresstraat 12-14, B-1000 Brussels, and acts as an associated agent on commission for AG Insurance SA/NV. AG Insurance SA/NV owns a greater than 10% stake in Touring SA/NV.
Article

01.12.2023

Investment grants for your business

Belgium’s three regions provide a range of grants for companies and self-employed people making investments. Our experts can help you make sense of the situation and submit your application.

The terms and amounts of investment grants vary greatly from one region to another. The applicable rules depend on the location of the operational entity making the investments. The company’s registered office is not relevant and can be located in any country. You should also bear in mind that applying for a grant is still a fairly cumbersome administrative process. That’s why our experts take care of all the steps, from submitting the grant application to collecting the grant money.

Flanders: a range of grants

Various types of grants are available in Flanders, the most important of which are support for strategic transformations, the ecology bonus, strategic ecological support, the SME e-wallet and the SME growth subsidy.

Each type of support targets different types of investment and different companies. Subsidy levels also vary widely, from 8% for a strategic investment by a large company to 50% for consultancy fees paid by an SME.

Our experts can help you identify subsidy opportunities and then arrange for you to meet a specialist from VLAIO, the Flemish Agency for Innovation and Entrepreneurship, who will then help you with the rest of your application.

Wallonia: traditional and ecological aid

In Wallonia, investment grants are reserved for companies operating in a limited number of eligible sectors. Excluded activities include retail, transport and the liberal professions.

The terms and conditions also differ according to the size of the company. Small businesses must invest a minimum of €25,000. Large companies need to reach higher thresholds and invest in a development zone.

Examples of eligible business investments include buying/building a property, buying land and buying new business equipment.

The basic grant varies from 4% to 6%, but can be higher if the applicant creates jobs, takes an innovative approach or diversifies abroad, for example. A larger grant, up to 20%, may be obtained for projects that promote the sustainable use of energy and environmental protection.

Please note that it is essential to submit the request before any firm investment commitment is made: investments for which you have already accepted a quote can no longer be subsidised.

Our experts can guide your company through the entire process.

Brussels: the most generous

The Brussels subsidy for investments in goods, property or works is open to most sectors. In total, around 80% of the capital's economic activities are eligible for grants. The two main exceptions are education and real estate.

To qualify for a grant, the investment project must be worth at least €10,000 for a start-up business and at least €15,000 in other cases, depending on the size of the business. In addition, it must aim to develop or improve an existing activity: simple replacement expenditure does not qualify.

The aid can amount to up to 30% of the investment, although the average is 12.5%. The level of subsidy depends on a number of criteria, such as whether the company is a start-up and whether the investment will increase the number of people employed by more than 30%.

Over the course of 2024, reforms to the aid system will increase incentives for sustainable and circular economy projects.

Please note that it is essential to submit the request before any firm investment commitment is made: investments for which you have already accepted a quote can no longer be subsidised.

Our experts can guide your company through the entire process.

Article

13.10.2022

Sylphar, Lansweeper and Qover win Private Equity Awards in 2022

On 12 October, our bank and the Belgian Venture Capital & Private Equity Association put the winning companies in the spotlight. With the support of Private Equity, all three completed a remarkable growth track.

The winners of the 2022 Private Equity Awards have been announced. It was the fifth time that BNP Paribas Fortis organised this event together with the Belgian Venture Capital & Private Equity Association (BVA). In addition to rewarding Belgian growth companies, this is also a good opportunity to highlight the added value of venture capital for start-up, fast-growing and mature companies.

And the winners are...

The three winners were selected from nine nominees in three categories: Venture capital, Growth, and Buy-out company of the year.

Qover was voted 'Venture Company of the Year'. This award was created for young companies that develop and market an innovative product or service with the support of a venture capital investor.

Qover enables any digital company to embed insurance in its value proposition. The company has built a tech platform that can launch any insurance product in any market, language and currency in a matter of days. The company is ready to scale up internationally and was praised for its innovative and disruptive business model.

Lansweeper was named 'Growth Company of the Year'. This category is for companies that have significantly expanded their activities through organic growth or acquisitions. They bring a financial partner on board who does not want control.

Lansweeper is an IT Asset Management platform provider that helps companies better understand, protect, and centrally manage their IT devices and network. The company has developed a software platform that can be used to create an inventory of all types of technology assets, installed software, and users. Besides setting an excellent financial track record, the company succeeded in gaining a solid foothold internationally.

Sylphar was the winner in the 'Buy-out Company of the Year' category. These are companies that achieve growth through involved management with the backing of a private equity investor with a controlling interest.

Sylphar develops and packages innovative and consumer-friendly OTC products worldwide. OTC products are medicines that are sold directly to the consumer without requirinng a doctor's prescription. Examples include tooth whitening products and skin, hair and body care products. Their spectacular digital transformation of the sales process, strong international expansion, and rapid product development were decisive factors.

"As a financial instrument, private equity is perfectly suited for boosting innovation and sustainable growth. The three winners have all proven this", says Raf Moons, Head of BNP Paribas Fortis Private Equity.

Find out more about Private Equity at BNP Paribas Fortis.

Source: press release

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