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19-07-2025 : Value or premium, which comes first?

Unlike the chicken and the egg, there is a simple answer to this question. In a takeover bid, experienced investment bankers first determine the value of the target for their client and then deduce the premium resulting from the comparison between this value and the share price.

Novices, on the other hand, are content to lazily add a standard premium (e.g. 35%) to the latest share price to determine the offer price. They then run the risk of a rebellion by shareholders who know how to count, and of the offer failing.

The investment banker's role in valuation is therefore not simply that of an Excel wizard, as the naive might think. He must educate his client and not waver in the face of his greed or ignorance; and convince him, if he wants to achieve his ends, that he must pay the value rather than fail to cross the threshold for a takeover or delisting. This is where the most professional people come into their own.

Recent examples show this:

- NDK (advised by Crédit Agricole du Languedoc) on PAROT: a premium of +243% on the three-month average price, a price corresponding to the multi-criteria value for this small, illiquid stock not followed by financial analysts.

- Talan (advised by ODDO BHF) on Micropole: a premium of 190%.

- When the Arnault group (advised by Crédit Agricole CIB) offered €44,000 per Financière Agache share, to acquire the 2,189 shares it did not own (0.07% of the capital), to take private this little-known holding company, part of the chain of control of LVMH, against an acquisition price of €2,500 to €3,500 (on 41 shares au-fil-de-l'eau) in the previous 12 months.This represents a premium of 1,157% (sic). A record, no doubt. But quality has never been cheap.

 

10-05-2025 : KKR - Capital Group: engagement before marriage?

Capital Group is one of the world's leading asset managers. Based in Los Angeles, it manages $2,800 billion, mainly through active management on behalf of tens of millions of individual investors. As examples, it owns 16.6% of Publicis, 10.3% of ASML Holding and 13.8% of BAT.

As with all active managers, the rise of passive management is a very real threat. While Capital Group has multiplied its assets under management by 2 since 2016, Vanguard, the pioneer of passive management, has multiplied them by 3 over the same period to $10,500 billion. With management fees of 0.07% of assets under management, Vanguard has commercial arguments that Capital Group does not have.

Private debt - i.e. unlisted debt, which is often more profitable because it is riskier than listed bonds - is a way of combating passive management by increasing the rates of return available to clients. But just because you manage $555bn in listed bonds doesn't mean you're comfortable with private debt.

KKR was born in LBOs, but has long diversified into all types of investments: infrastructure, real estate, . . . and private debt ($100bn out of $600bn of assets under management). Joining forces with Capital Group means finding new resources: the countless individuals that Capital Groupe serves via 200,000 independent financial advisors. It is true that in 40 years institutional investors have had time to convert to the charms of private equity, while only 5% of private individuals have access to it.

Last year, the two companies announced an alliance to create two new funds, launched a fortnight ago, 60% of which are invested in listed bonds and 40% in direct loans to companies or asset-based financing. The minimum investment is $1,000. On a quarterly basis, and if necessary, up to 10% of the fund can be redeemed at net asset value, and we can imagine that KKR will make the corresponding liquidity on the private debt held by these 2 funds. The management fee announced for these 2 funds is 0.84% or 0.89%.

Other funds mixing listed and unlisted assets should be launched in 2026 by the duettists, in the field of equities, and in that of target date funds. From there, we can imagine that one day, KKR and Capital Group might consider merging, having learned to work together to better find new assets to manage and offer mass affluent individuals access to private equity.

But until then, they will have to prove that their ad hoc alliance is effective despite their different corporate cultures, especially as their competitors are not standing still: Apollo has done the same with State Street and Vanguard with Blackstone. The distinction between listed and unlisted assets is weakening, and this is not a trend that is going to disappear any time soon.