Altran has evolved from a French start-up to a worldwide major

When Apax Partners first invested in Altran in 2008, it aimed to propel this French company, world leader in innovation and high-tech engineering consulting, into the future. Gilles Rigal, Partner, takes a look back at this mutually-beneficial relationship.

Altran was a French leader with high potential

“Before we invested in Altran, I was convinced that the outsourced R&D market was about to experience significant growth,” says Gilles Rigal. Time-to-market constraints were increasing, and R&D had to become quicker and more efficient. But companies could not assume the required expenditure without taking a direct hit to profitability. Apax Partners was aware of the potential of the outsourced R&D market and set out in search of a promising young company to support. Gilles remembers that “Altran was, in my view, the most promising company in the sector.” The French leader’s advantage was its international base, which was much more extensive than that of its competitors. “Already at that time, 40% of Altran’s revenue derived from outside France.”

To support Altran, Apax Partners devised a unique transaction, both in the strategy used to purchase a stake in the company and in the type of investment. “We acquired a stake by buying shares from the company’s founders and by carrying out a €130 million capital increase that we guaranteed. This was a relatively unusual structure”, Gilles explains. The second specificity of the transaction was Apax Partners’ positioning as a core, minority shareholder with 30% of the share capital at that time. That holding gave us significant representation on Altran’s board of directors and still does today.”

The new business model, based on international expansion, boosted Altran’s growth

To help Altran ramp up on a global scale, Apax Partners identified three sources of value creation right from the outset that could boost the company’s growth and margins. The first was international expansion, by developing Altran’s presence in Europe, “particularly Germany”, as well as in Asia and North America. The second was migrating the business from a technical assistance mindset to a project mindset. This was a fundamental change for Altran. It meant the company would henceforth sell projects, not resources. The third transformation was aligning the cost and gross margin structure with market practices.

As a result, total revenue crossed the €2 billion threshold in 2016, Altran has more than 26,000 employees in 20 countries, and it made the “transformative” acquisition of Aricent at the end of 2017. “Post-Aricent, France will account for one-third of the business, and the company will have more than doubled in size since we first invested.”

The biggest challenge in the French leader’s rise was “the 2009 recession. Altran had not yet started to change its business mix, and it felt the impact.” Among the sectors where Altran operated, the automotive sector was particularly hard hit. “We supported the company and helped it through that difficult period”, says Gilles. “If another downturn were to come, we would suffer, but less, because we have changed and improved our business model.”

Gilles believes that a core shareholder in a listed company should apply the same corporate governance principles as in an unlisted company, where the investment fund is the majority shareholder. The Audit, Appointment & Remuneration and Investment Committees “are all important aspects of corporate governance, and Apax Partners participates in each of them.” Apax Partners’ approach to strategy is similar. “Through our four sectors of specialisation, we bring to the table our understanding of the business and the changes it is undergoing.”

“France is capable of producing world leaders”

Gilles Rigal is most proud of “having supported a French company and made an undisputed world leader out it. This is proof that France is capable of producing world leaders in future-oriented businesses.” Gilles is also proud of having assembled a highly-talented management team to run the company.

Now the world leader in its lines of business, Altran must integrate Aricent smoothly, with the help of Apax Partners. And this is only the beginning. “The company must keep in mind that a number-one position is always fragile, and that it must continue to accelerate.”

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