Round table discussion on the new rules of international growth
Trois Directeurs Associés d’Apax Partners partagent leur vision de ce qui fait selon eux, aujourd’hui, le succès d’un développement à l’étranger.
After hearing the heads of four companies – Anthony Dinis (Vocalcom), Christophe Fenart (Europe Snacks), Olivier Jallabert (Amplitude) and Catherine Lespine (INSEEC Group) – describe their experience of international growth, we brought together three partners from Apax Partners to share their views on what ensures successful international growth today.
During this round table discussion, Bruno Candelier, Partner responsible for investments in the Retail & Consumer sector, Bertrand Pivin, Partner responsible for investments in the Business & Financial Services and Healthcare sectors and Gilles Rigal, Partner specialising in the TMT sector, exchanged views on the strategies to be adopted, the growth methods to be favoured and the human and cultural balances that need to be re-examined.
On what SMEs and mid-sized companies are aiming for abroad
“Why expand abroad?“: a question that garners many answers but that is sometimes not even asked. In an industry that is by its nature global, such as new technologies, “If you want to stay in the race, it is crucial to have an international vision“, stresses Gilles Rigal, citing the example of the latest edition of CES, which brought together start-ups from all over the world in Las Vegas. He continues: “In the high-tech products industry, the question of international growth goes hand-in-hand with that of recouping R&D investment. The expenditure incurred upstream means that the business must have access to a large market, yet few markets are large enough to forego an international dimension. The only exception is the United States“.
For Bruno Candelier, however, international expansion is “first and foremost an opportunity for growth“. With France’s economy stagnating, establishing a presence abroad has become an “essential driver of growth” for retail and consumer goods businesses. As well as helping to increase the top line, “it can also be a factor in diversifying the business risk, especially in the consumer goods sector, where recent mergers of major French retailers have focused the majority of producers’ turnover in a small number of customers“.
Bertrand Pivin, meanwhile, emphasises the advantage of international growth for “observing what has been proven to work elsewhere and importing the best methods“. He cites the example of Sweden: “What is happening at the moment in Sweden’s hospitals reminds me of the changes undergone by the automotive industry in the 1980s: a profound transformation in the way in which a value proposition is delivered to the beneficiary. In Sweden, nurses meet every morning at 7 a.m. to analyse what happened the day before. The goal of these morning briefings is to look together at what could be done better, more cheaply and more quickly, in order to improve the way in which the hospital works and all patients are cared for.”
The internet and new territories to explore
The web, of course, changed the landscape in terms of international business. Bruno Candelier sees e-commerce as a means of “testing the appetite of the market quickly and at low cost“. For example, “The company Maisons du Monde, which translated its website into seven languages in 2011, quickly realised that Germany was a market offering great potential given the performance of the German website. The first German store was thus opened in 2013“.
Bertrand Pivin believes that the accessibility of information enabled by the Internet has “encouraged foreign companies to expand into France and vice versa“. After a brief pause, he adds: “Perhaps businesses need to expand internationally to avoid being swallowed up by the expansion of others. In my view, instead of being walked all over, it’s better to take the initiative!”
Gilles Rigal also cites the impact of the internet in the “acceleration and scale of the process“. He also notes the emergence of new regions, especially the Middle East, which has become an attractive market for IT companies. “We assisted Vocalcom, a French software publisher, which has formed a joint venture in Dubai with a local family-owned fund“, he explains.
On the best way of establishing a presence: organic growth or acquisitions?
Expand abroad through subsidiaries, or by purchasing a local business? For Gilles Rigal, this depends on the maturity of the business and its teams. He cites two mid-sized companies to illustrate his viewpoint: “With a group like Altran, which employs more than 20,000 people worldwide, we implemented a proactive policy of foreign acquisitions. In February 2014, Altran made a key acquisition in the US with Foliage, which enabled it to access the American market. In contrast, the CEO of Vocalcom, Anthony Dinis, started from scratch by using subsidiaries“. “Today, the best growth model for me is one that combines organic growth and strategic acquisitions. This calls for the risk to be properly understood and weighed up, without underestimating the synergies thinking it will be easy“, he summarises.
Bruno Candelier notes that, in retail, acquisitions and build-ups are quite rare. “Organic growth is most common. It takes longer, but creates just as much value and is less risky“, he explains. Some external growth strategies can nonetheless pay off, such as that applied by Alain Afflelou, which is now the “number two on the Spanish optics market through the acquisition of the Carrefour Opticians stores in Spain“. In the consumer goods sector, however, acquisitions are the norm as “They can save a lot of time by offering immediate access to local commercial relationships, through which businesses can promote their product portfolios“, notes Candelier.
On how to adapt the company’s offering; or modify it as little as possible
Bertrand Pivin describes the specific structural characteristics of certain local markets, using the example of the health sector: “In Sweden, hospital management is entrusted to private companies selected by local authorities. For example, the private service provider responsible for Saint Goran Hospital in Stockholm is committed to ensuring a certain level of service for a predefined overall amount, over a period of around 15 years. In France, hospitals are managed by the public sector, represented by the government or the mayor of the town. They operate like hotels, making available infrastructures and medical equipment. Practitioners carry out their assignments and bill the hospital for their services. So it’s a very different approach“. He continues: “The education sector, meanwhile, is mostly financed by the government. Private industry develops in accordance with the quality of the public education offering“.
Bruno Candelier believes that, in retail, “The most virtuous international growth is that which calls for only a small modification to the offering“, as this “limits the complexity and extra costs” of this new phase of growth. However, he acknowledges that “It is often necessary to adjust the offering to suit local tastes and body types“, citing the example of Europe Snacks, which adjusted its recipes to European tastes.
On the teams to put in place, multiculturalism meets with unanimous approval
Gilles Rigal speaks: “For me, the subsidiary manager should be culturally very close to the country: to deal with American customers, it’s better to have an American manager. He should be backed up by someone from head office, with a thorough understanding of how the group works and in whom the CEO has complete faith“. Moving from subsidiary managers to the composition of Management Committees, he continues: “Recruiting people from different countries is not just a symbolic measure – it adds a fresh approach to business. Of course, we can’t really generalise, but each culture has its own particular relationship with the world. For example? “The Americans often see Europe as a single country, although this is changing. The Dutch, meanwhile, are extraordinarily open to the world: they come from a small country dotted with international ports and English comes naturally to them. The Germans are very cautious in their approach to international growth. They took an interest in the Chinese automotive market long before we did and gradually built up their presence thereby strengthening the things that worked. The British are historically close to South Africa and India…” explains this former entrepreneur, who has spent long periods living in the United States and Europe. Getting into his stride, he claims that “You have to reason with people who do not think like you do“.
Also claiming that “The major risk of international growth lies in its human and cultural dimension“, Bertrand Pivin concludes with an example of a successful integration between two companies, one French and the other Norwegian, in the satellite telecommunications industry: “To smooth things along, we created a holding company and appointed a highly experienced English CEO with real stature, along with a Chief Financial Officer. They put together the management team they wanted by selecting the best people for the two companies’ operational teams. This meritocratic approach, which removed the national aspect from the debate, was well received“.