Intermediate by name, mid-market by nature

When ICG thought about setting up an infra business, it was lucky enough to find a team at EDF Invest ready and waiting. New head Guillaume d’Engremont outlines the plan.

Although Asterion Industrial Partners and AVAIO were ‘spun out’ of household names, our third contender ‘spun into’ a well-known asset manager.

In May 2018, Guillaume d’Engremont, Jérôme Sousselier and Ludovic Laforge all left EDF Invest to join Intermediate Capital Group. During their five years with the French company’s infrastructure team, they had made investments – totalling around €1.6 billion of equity – in energy and transport assets such as Q-Park, Thyssengas and Autostrade per l’Italia.

It’s not often that a manager setting up an infrastructure team can import one from elsewhere. However, d’Engremont believes ICG and the trio were a “great cultural fit”.

“ICG had been looking for a way to enter the infrastructure asset class for some time,” he says. “For them, it was important to have a team like ours, which had experience working together. There were a lot of similarities in the DNA of ICG, which always had a big focus on the mid-market and downside protection.”

It took the newly formed group just under a year to secure its first investment: a 30 percent stake in Océinde Group, a fibre broadband provider in the French overseas department of Réunion. The acquisition, which d’Engremont deemed “very important for our strategy”, has been made through ICG’s balance sheet as the team prepares to launch its first fund later this year.

As he explains, ICG’s infrastructure strategy will be to target mid-market investments. However, much like with Asterion, the question remains: does Europe really need another mid-market player, and how will the group stand out from the pack? Part of the answer lies in the corporate backgrounds of the team. D’Engremont previously headed EDF Invest, where Laforge was also manager of the mergers and acquisitions team. Sousselier had previously held a similar post to Laforge at French transport group Alstom.

“Our corporate background is important because, in the mid-market, a number of sellers are corporates, so we are better able to understand that than others,” says d’Engremont. “We are not pure financial investors, so we understand their objectives and constraints. I’ve been on the other side of the table myself.”

Mezz advantage

The other planned ingredient in what he hopes will be a recipe for success will be to leverage ICG’s expertise and reputation as one of Europe’s top mezzanine debt investors.

“We have a very flexible strategy in terms of [minority or majority] ownership. When we have a minority stake it can be combined with a mezzanine tranche, which gives additional protection. This is unique in the infrastructure space.”

The team has expanded to seven members and ICG intends to double this by 2020. The growth of infrastructure and some of the managers in the asset class is one of the challenges for d’Engremont.

So where does he see the ICG team in five years’ time? Aside from expanding the team to other locations in Europe beyond its base in Paris, building ICG up into a key player in the mid-market space, and thereby making that space more competitive.

“We really think there is a key opportunity in the mid-market space because a number of players are getting bigger and bigger. For the past two years or so, we’ve seen a number of mid-market players double in size, and they are not mid-market players anymore. The market [for infrastructure as an asset class] is still only 12-15 years old, and this has left a bit of a vacuum in the mid-market space. Certainly, there is room for us to be very active in that market.”