We had the privilege of interviewing Emmanuelle Guez Betthaeuser, Partner of Pléiade Investissementfor an in-depth discussion on the art and science of investing in SMEs. In this conversation, Emmanuelle reveals her valuable insights and shares information about Pléiade Investissement's approach, the importance of sustainability, lessons learned from investing in SMEs, and much more.
Enjoy your reading!
Emmanuelle, it's a pleasure to welcome you here today. Could you please introduce yourself to our readers?
Good to see you again, Olivier. I'm Emmanuelle Guez Betthaeuser, a partner at Pléiade Investissement, an investment company with a rather different approach to traditional funds.
The funds we manage do not come from subscribers, but fromindividual shareholders- around 25 of them. Each of them is a seasoned entrepreneur who has created or acquired companies in the course of his or her career. We invest out of our own funds, without ad hoc vehicles or external fund-raising.
It's a closed shareholder structure that offers internal liquidity to those who need a little cash. One of our particularities is that our shareholders have no liquidity over the years, as Pléiade does not pay dividends in order to retain the room for maneuver to grow our holdings, and retains cash from disposals to reinvest in new companies.
Our shareholders are there to help other entrepreneurs succeed. Of course, they build up an asset value, but there is no intermediate liquidity. Pléiade is a generalist in its investments, with a strong history in catering and software, but today we are also shareholders in light industry, senior residences, the distribution of electronic components or electric scooters, and even in the sorting and recovery of industrial waste.
For us, what counts above all is the encounter with a manager and a project that seems to us to make a difference. We invest between 2 and 10 million euros in start-up capital and can support up to 20 million euros in company development. We're always there for entrepreneurs, because we know how lonely they can feel.
We spend a lot of time supporting our companies, whether we are minority or majority shareholders. Our aim is to make life as easy as possible for the manager, sharing our experience to help him or her think strategically and structure the company as it grows.
Pléiade carries out all types of transactions: LBOs, MBIs, share buy-outs, expansion capital ... For us, the most important thing is to meet the entrepreneur and understand his project, which must be characterized by a differentiating technical positioning, high added value compared with the competition, and premium positioning in its market.
You told us that Pléiade had 25 shareholders. Did this group come together all at once, or were there departures and arrivals over time?
That's a very good question, Olivier. Most of our shareholders were there from the outset, forming the initial core of our company. Subsequently, we had the pleasure of welcoming other players, notably managers with whom we had worked as investors and who, after selling their company with us, expressed the wish to become Pléiade shareholders. As a result, we now have 5 shareholders who are former executives, enriching our profile with people who were still recently in the field and from new business sectors.
And Emmanuelle, were you an entrepreneur before joining Pléiade?
My background is a little different. I began my career by spending 11 years at Crédit Lyonnais, as head of corporate finance. I was in charge of equity transactions. Then, one of the managers for whom I had raised funds poached me and I joined his team as Corporate Secretary/COO. I spent 9 years with this SME, now an ETI, overseeing all support functions: finance, legal, HR, marketing and IT. I was also responsible for managing the shareholders I had brought on board and for international development via external growth.
I stayed with the company until its sale, in which I played an active part. Having worked in equity financing in banking, and then in equity financing in small and medium-sized businesses that had become ETIs, I felt it was the right time to move over to investment funds. Armed with these two experiences, I was ready to support managers in the best possible way. I was looking for a long-term, entrepreneurial fund to align me with the company's economic interests, and that's how I came to join Pléiade as a partner almost 7 years ago.
What criteria determine your choice to accompany a manager? Is there a particular thesis behind it, apart from the entrepreneur's state of mind?
Mindset is crucial, but it's not the only criterion. Above all, we're looking for a compatibility of DNA and values. And that's not just marketing, it's a reality for us. Since we remain invested in companies for 5, 10, 15, even 20 years (we have two companies in our portfolio for 22 years, 50% of our companies for more than 10 years), it is essential that we share the same values with the managers we accompany.
We're also looking for ambitious entrepreneurs, because our aim is to help companies develop and adapt to growth phases, whether to structure themselves for rapid growth, to expand internationally, or to achieve external growth. An entrepreneur needs a clear vision and ambition.
Finally, all the companies we work with have a significant technical or service differentiation. We don't invest in low-cost or volume models. Our investments cover a wide range of sectors, from high-end fast food (such as Cojean) to highly technical plastic injection/micro-turning for aeronautics or medical implants, as well as the recycling of hazardous and industrial waste. These companies all have high barriers to entry in terms of skills, safety and health. They all offer high-quality customer service, with real added value.
Our philosophy is to sell at the same time as the manager to a manufacturer. In this way, our interests are 100% aligned. So it's crucial that we share a common vision and understand the executive's strategy to ensure this alignment. If this alignment exists from the outset, there's no reason why it shouldn't continue, since our aim is to sell at the best price when we judge that to be the best opportunity.
Do you invest in companies that are growing fast but haven't yet found their way to profitability, or is profitability an important criterion for you?
Our aim is to invest in companies with a profitable business model. For example, we invested in a senior residences company which, as a whole, was not profitable due to new openings. However, the established residences were all profitable.
We are able to invest in companies that are in a "ramp-up" phase, where certain opening phases may mean that a business has not yet achieved profitability. We don't mind, provided the business model is sound and there is evidence of profitability on a specific entity, residence, store, or segment.
Have you been inspired by any leaders in your career?
I find all the managers I've worked with inspiring. They are extremely courageous people. They devote their time to creating and maintaining jobs, and they're facing difficult times. The last two or three years have been particularly difficult for managers; I'd say there's never been a more difficult period before.
After the Covid crisis, which totally disrupted the way we work, managers had to deal with the war in Ukraine, rising commodity prices and the energy crisis. On top of this, the way we work has changed: it has become difficult to recruit and retain employees, and to maintain a strong corporate culture. Despite all this, our managers are doing an extraordinary job and showing great resilience.
Did certain managers prove particularly competent in phases of chaos?
It's true that the profile of a manager who's good at development is often not the same as one who's good at restructuring. Some managers manage to do both, but most do not. In general, these managers know how to surround themselves with people who compensate for the weaker side of their profile (often restructuring, which must be a passing phase!). We're there to support the executive, enabling him or her to concentrate as much as possible on business development and strategy.
Do you support managers in their ability to recruit the right people, structure the right organization, etc.?
Absolutely. We pay particular attention to ensuring that the manager is surrounded by the right people, depending on the size of the company. We prefer to anticipate and are convinced that you need to be well structured to grow. When this is not spontaneous, we try to show the advantages of such an organization.
We can help some managers to recruit a Human Resources Director or an Administrative and Financial Director, and sometimes even a Managing Director. So yes, we are quite involved, whether at the beginning of the recruitment process or at the end, when the executive is hesitating between two profiles.
For us, it's very important, once a certain number of employees and size of sales or structures have been reached, to have a structured management team. A manager cannot succeed alone.
Do you create synergies between your holdings?
Yes, we create synergies at several levels. For example, when a CFO is looking to implement factoring, we put him in touch with another CFO who has recently set up a similar system. We can also share experiences on specific subjects or foreign markets.
We also try to create commercial synergies between our companies. For example, we have Quietalis, a company that installs professional kitchens. We put them in touch with Montana, which needs to equip the kitchens of its senior residences. However, our role is limited to opening doors and putting companies in touch. Thereafter, we withdraw completely and let the companies manage their relationships as they see fit. Our aim is not to interfere in their business model, and not to force them to make special efforts just because they're in our portfolio. We want them to feel comfortable doing business according to their own business model.
How do you go about selecting companies?
In 2022, we completed three new operations, two of which were not intermediated. However, I would say that 70% of our deals come through intermediaries. We prefer to work with small intermediaries who target funds that really match the manager's expectations and DNA, rather than with firms that put 15 funds in competition on an Excel spreadsheet. Our added value lies in the support we provide over the long term. For example, we don't submit an offer until we've met the company's management.
We have no obligation to invest, so if we don't have the conditions to do so, we don't invest in a new company. There are so many operations involving companies in which we are already shareholders, that we're not short of work. Similarly, we have no exit obligation. So, when we invest, it's because we have a strong conviction and believe we can add value.
We never exit a company at the wrong time, as we have no obligation to sell due to our lack of time constraints. As a result, there are always ups and downs within companies, but we take the time with management to try and understand why, and to restructure if necessary. We can decide with management to put growth on hold to structure, solidify and then resume growth once the foundation is solid. We've done this with a number of companies, and today they're very successful. So, at the end of the day, our ability to give time is a real opportunity for the company. Of course, we also support the manager in more difficult times.
Last question: if you were to take over the presidency of France tomorrow and had a measure to introduce to encourage investment in SMEs, what would it be?
It's a difficult question. Perhaps a message of relaxation or cooperation on the part of banking establishments towards SMEs that are healthy but under cash flow pressure given the succession of recent crises. What I'm noticing today is that banks are much more rigid these days. Of course, this depends on each banking pool and each individual within the bank. In some of our companies, we are very well supported by the banking pool, even in somewhat tense situations, with everyone doing their bit on the side of shareholders and banking partners, and this enables the company to move forward under good conditions. On the other hand, there are banking pools that close too quickly, making the situation even more complicated for the company, which sometimes only needs support for a few months.
Today, we can see that banks mainly finance very attractive assets, which is detrimental to the economy. I think banks should be more flexible when it comes to supporting SMEs. At Pléiade, we're in it for the long haul, and that's why we're willing to support companies through all their cycles: up and down.
I myself spent 11 years in a bank and really enjoyed those years. We tried to be partners with the company, oriented towards business, even if it's still necessary to keep a framework and safeguards.
Otherwise, I find that today, it's often the chartered accountants and statutory auditors who play the role of advisors and support, rather than the company's bankers.
Of course, there are some companies where we really do work cooperatively with the banking pool: finding solutions together means a better future for the company and greater peace of mind for the financial partners, whether bankers or investors.
Many thanks for your time, Emmanuelle!
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