LBOs, initial public offering and sale to Capgemini: the Prosodie saga

georges-croixFormer Chairman and CEO of the Prosodie group following its IPO and an LBO arranged in less than a month, Georges Croix recently co-founded Digital Dimension with the Econocom group. He revisits the shareholder strategies that lie at the root of his success.

“In order to be independent, you have to agree on a project”

“Even as a very young child, I already had an independent streak…and a lot of problems with authority”. Georges Croix has held on to one requirement from his childhood years: retaining his freedom “in relation to shareholders, banks and clients”. For this self-taught Chairman and CEO, independence is achieved when all partners manage to agree on a project and when everyone’s role is clearly defined. First and foremost, this involves a corporate project: investors agree on an operational plan with precise objectives. “I’m currently associated with the Econocom group; however, the project has been designed around resources that guarantee my independence”.

The independence to choose his employees, for example, which for Georges Croix is an important part of the project. “I believe that the head of the company should set the example: I’m generally the first to arrive at work and the last to leave”. The other side of independence is responsibility – that of the Chairman and CEO and his/her teams. “Organising an LBO requires that the company’s level of profitability be defined. If we invest in an offer but it doesn’t generate enough money, that’s a problem. Knowledge makes people accountable”.

The Prosodie saga 

At the Prosodie group, Georges Croix experienced two LBOs, one IPO and a sale to a corporation. The first LBO took place to create Prosodie from the merger of two software engineering companies founded by Georges Croix and the company SJT, an operational partner, with the objective of launching the first independent telecom operator. “For this transaction, we arranged an LBO involving Apax Partners alongside ABN AMRO. I was rather impressed by their approach: they bring added value through their financial expertise, but they don’t do it in a dogmatic way. They are there to provide support”. The company was listed in 1998. “We paid off the LBO within a few months and raised funds to finance our acquisition programme in France and abroad”.

In 2006, Prosodie’s majority shareholder decided to retire. This gave Georges Croix one month to get into position. “I worked on specifications explaining my vision for the group’s growth, as well as the ownership aspect of things”. In order to “ensure his operational independence”, he decided to manage the takeover bid with an investment fund.  He met with five funds and selected Apax Partners. “Apax Partners provided an environment where I could gain perspective, meet people, open doors, etc., always with an eye to helping my thought process”.

Prosodie therefore exited the stock market. Georges Croix declares that he is happy to be free of the constraints associated with listed shares. “If the positioning is not clear for the analysts, it’s very complicated. We were perceived as both a telecom operator and a services company. This meant that any time the telecom or IT services sectors took a nosedive, our share price went down – even though we were experiencing growth and good profitability rates”.

After the stock market came the LBO, which Georges Croix wanted carefully handled. “At the time, LBOs were easy to organise, but I didn’t want to take on excessive leverage in order to continue to invest.” This meant 50% equity and 50% debt for the LBO managed by Apax Partners and Prosodie’s management team. “The debt must be managed through the company’s profitability, which requires to think about investment choices and demands a certain rigour in the management of daily operations”. Georges Croix is convinced of this fact: “you become much more meticulous as an entrepreneur after working with a fund”.

Five years after the LBO, in 2011, Prosodie was sold to Capgemini. However, corporate shareholders are not Georges Croix’s cup of tea. “You have political challenges within groups: power struggles, internal turf wars, etc., employees have broader ambitions than just serving the group”.  He left Prosodie-Capgemini in 2012. Shortly afterwards, “a young 73-year old entrepreneur”, the founder of the Econocom group, asked for meeting with him. “He told me, ‘I want to create a project with you’”. Jean-Louis Bouchard brought 100 million euros to the table. “He acted like an investment fund. I invest this money as I please by buying companies”, says Georges Croix with a smile. Eighteen months later, Digital Dimension manages eight companies specialising in the digital transformation of major companies, for a consolidated turnover of 100 million euros.

4 tips on selecting an investment fund

In Georges Croix’s opinion, you have to approach people who understand your business. “This was the case with Eddie Misrahi for Prosodie,” points out the Digital Dimension Chairman and CEO, adding that he met with funds “that didn’t care about Prosodie’s business and were only looking at the profitability indicators.”

Second point: the size of the fund. “If it’s too small, it’s a disaster because it won’t be able to support your future growth plans. Conversely, if the fund is too big, it may want to amplify your growth at an overly rapid pace by imposing acquisitions”.

“Be careful of the debt level,” warns Georges Croix, who has met many company leaders who do not hesitate to take on high levels of debt. Debt must be calibrated according to your activity profile, your growth and your profitability.

A final factor that is becoming increasingly important: the international aspect. “No matter what the nature of the business is, an international component is now essential”. An investment fund should open doors in France and abroad. “This selection criterion will be essential for me in the future,” concludes Georges Croix.

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