In a recent interview with Bloomberg, Jean-Marie Laurent Josi, the CEO of Cobepa, a private equity firm based in Brussels, has expressed concerns regarding the potential downturn in the private equity industry. Josi attributes the current stability of the market to the thriving secondaries market, which he believes is preventing a significant correction. He noted that a long period of low interest rates has led to less selective deal-making practices in the sector, and now, a renewed focus on high-quality investments and strong returns is essential.
Cobepa, backed by affluent European families and boasting €5.1 billion in assets with zero debt, has been actively navigating the challenges of the private equity landscape. The firm has reported steady activity in acquiring and selling companies, maintaining dividend payments, and making inroads into the U.S. market. Notably, Cobepa has completed two significant investments in the U.S. this year: a minority stake in Sax, an accounting and tax advisor, and a stake in Eagle Fire, a fire protection specialist.
The strategic rationale behind these acquisitions aligns with Cobepa's goal of diversifying its portfolio, which already comprises 21 companies across Europe and the U.S. This diversification includes stakes ranging from limestone producer Carmeuse to insurance platform Ascentiel Groupe. Josi emphasized that while the private equity market is becoming increasingly competitive for new entrants, established firms like Cobepa must focus on credibility to access valuable deals.
The financial implications of these investments are significant, as Cobepa seeks to adapt to rising financing costs and a scarcity of acquisition targets, which have made capital-raising more challenging for many buyout firms. Josi criticized the industry's trend towards volume-driven strategies that rely heavily on debt-financed distributions, arguing that this has undermined the pursuit of higher-return, riskier investments.
Looking ahead, the private equity sector must navigate a landscape characterized by rising costs and challenges in exiting older deals. As for Cobepa, its ongoing investments and strategic focus on high-quality assets position the firm well amid these market dynamics.
The coming months will be crucial for Cobepa and the broader private equity industry as they adapt to these evolving conditions. Regulatory considerations may also play a role in shaping the sector's future, as firms seek to comply with antitrust regulations while pursuing strategic growth opportunities. Overall, the resilience of the secondaries market may be key to preventing a major downturn in the industry, as highlighted by Josi's insights.