There Are Risks Under Trump But Economy Is Safe, French PE Says

  • French private-equity firm Eurazeo rolls out U.S. expansion
  • Eurazeo seeks deals in $200 million-$500 million sweet spot

There’s political, social and geopolitical uncertainty in the U.S. under President Donald Trump, but the economy is a safe bet.

That’s Eurazeo SA’s baseline analysis as the French private-equity firm looks across the Atlantic for growth and deals in the $200 million to $500 million range. The expansion strategy, initiated 15 months ago, is more relevant than ever in the wake of Trump’s election and the widening gap between U.S. and European economies, top executives Patrick Sayer and Virginie Morgon said in a joint interview in Paris.

Virginie Morgon

Source: Eurazeo SA

“We see uncertainty in the U.S. on politics, geopolitics, social issues, but not economic,” Deputy Chief Executive Officer Morgon said. “Given the accelerated breakup of the European Union, the uncertainty around the French election, and the acceleration of macroeconomic growth in the U.S., we’re even more convinced with our decision to invest there.”

U.S. gross domestic product is estimated to grow 2.3 percent in 2017 and 2.5 percent the following year, an acceleration from 1.6% last year, according to forecasts by the International Monetary Fund. That’s well above the forecast for France of 1.3 percent for 2017 and Germany’s 1.5 percent. Financial markets have factored that data in, with the S&P 500 Index closing last week at an all-time high.

“Markets are betting that tax cuts should help companies in the U.S., as well as betting on infrastructure investments,” CEO Sayer said at the company’s headquarters in the French capital. There’s no reason to think investors have lost faith in Trump’s ability to make good on promises of boosting the economy, he said.

Expensive Assets

The business world more broadly has celebrated the potential benefits of a Trump-driven economic boom in the U.S., though his political moves including a ban on some migrants has drawn criticism, especially from the Silicon Valley.

Eurazeo, which had a net asset value of about 4.8 billion euros at Sept. 30, aims to balance out its portfolio between Europe and the U.S. in the long run. The firm is betting on its international expertise to differentiate from local players and advise the companies it invests in on global expansion.

Morgon moved to New York in recent months to lead a 7-person team and screen potential targets locally, with a focus on the consumer and business services sectors. They won’t rush into anything though, especially as assets are expensive in the current context, Sayer said.

“I hope there will be the opportunity to make one or two deals but we have no time pressure. The only pressure we have is to make good investments,” Sayer said. If that doesn’t happen right away, “in case of anxiety on the markets, holding cash wouldn’t be a bad thing at all.”

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