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FINANCIAL AND LEGAL INFORMATION
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Business description
1.3.4
ALTAMIR’S CASH MANAGEMENT
AND PERFORMANCE
OPTIMISATION STRATEGY
CASH MANAGEMENT STRATEGY
One of the key challenges for a listed private equity company
is its cash management. Unlike private equity funds, where the
responsibility for cashmanagement is left to the subscribers (each
new investment is financedby a call for funds fromthe unitholders
and divestment proceeds are distributed immediately), listed
companies finance new investments through their available cash,
which is generated by divestments.
A listed private equity company needs to avoid two pitfalls in its
cash management: firstly, having too much cash, which could
hamper its performance; and secondly, not being able to meet
subscription commitments for the funds in which it has invested,
which could result in the Company incurring heavy penalties or
being required to seek external funds at unfavourable terms.
Borrowing is one potential solution to this problem. Altamir
considers this strategy to be a significant risk factor. In addition,
its SCR (
société de capital risque
) tax status limits its potential to
take on debt to 10%of its statutory net book value (around €57m
at year-end 2016). Altamir’s financial strategy is to set up credit
lines for the maximum amount allowed under tax regulations,
but to only draw on these credit lines to meet potential timing
differences arising between the receipt of divestment proceeds
and investment payments.
ALTAMIR’S PERFORMANCE OPTIMISATION
STRATEGY
The Management Company considers that two conditions need
to be met to optimise Altamir’s long-term performance:
the ratio of the amount invested at cost/statutory net book
value should be as close as possible to 100%; and
investment quality should conform to the Company’s risk/
return investment strategy.
To achieve these objectives, every three to four years, when
new Apax Funds are launched, the Board of Directors of the
Management Company and the Supervisory Board prepare
a forecast of expected divestments for the next three to four
years in order to determine the total amount that can be invested,
taking into account requirements related to management costs
and dividend policy.
In 2015/16, the Boards approved the Management Company’s
recommendation to invest €500m over the period 2016-19,
allocated as follows:
€306m in the Apax France IX-B fund;
€138m in the Apax IX LP fund; and
€62m in co-investments.
This €500m investment does not imply that the credit lines will
be used.
The divestment forecasts are clearly uncertain, while the
subscription commitments in the funds are irrevocable and give
rise to significant penalties if the commitments are not met.
However, the Management Company can use three mechanisms
to meet unforeseen events:
if there are insufficient divestment volumes:
it can use available credit lines,
itcandecidenottousethesumavailableforco-investments,or
it can reduce the commitment made in theApax France IX-B
fund from €306m to €226m;
if there are excess divestment volumes:
it can increase the volume of co-investments.
Introducing co-investments into Altamir’s investment strategy
gives the Company additional upward and downward flexibility
to achieve its objective of being invested at 100% of its statutory
net book value.
In addition, the co-investments alongside the Apax Funds do not
bear the management fees and carried interest for these funds.
Instead, they form part of the management fees and carried
interest due to Altamir Gérance and to Class B shareholders.
1.3.5
ALTAMIR’S MANAGEMENT COSTS
CHARACTERISTICS OF ALTAMIR
Altamir is managed by its Management Company, Altamir
Gérance, which is also the general partner. Altamir Gérance is
advised on its investments by Apax Partners SA. Altamir and
Altamir Gérance have no employees.
Altamir’s management costs comprise:
annual management fees;
administrative and operating costs not covered by the
management fee; and
carried interest (performance-based remuneration).
Since their creation, Altamir, Apax Partners SA, Apax Partners
MidMarket and Apax Partners LLP have pursued a policy of
deducting the transaction andmonitoring fees chargeddirectly
to the portfolio companies fromthemanagement fees charged
to the funds.
Altamir’s investment process is in a transition phase. Since its
creation in 1995 until 2011, Altamir co-invested alongside the
funds managed by Apax Partners SA. Since 2011, Altamir has
invested primarily
via
the funds managed by Apax Partners
MidMarket andApax Partners LLP, with the option to co-invest
alongside these fundswhen theopportunity arises. These funds
are third-party funds in that Altamir Gérance has no economic
ties with these two management companies.
As of 31 December 2016, direct investments still represented
48% of the portfolio at fair value and investments
via
funds
represented 52%.
The transition phase is expected to last another two or three
years andwhen it ends, investments
via
funds should represent
over 80% of the Net Asset Value.
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REGISTRATION DOCUMENT
1
ALTAMIR 2016