To stay competitive in a deteriorating economic environment, private equity funds will need to show greater ingenuity in securing the financing required both for new acquisitions and for optimizing their existing portfolios.
Decideurs. Can you remind us what makes factoring specific?
Thibaut Robet. Factoring turns nearly all of a company’s accounts receivable into immediately available cash. This financing tool is sometimes misunderstood by financial decision-makers, yet it is strategic for B2B companies, which are paid on average after 60 days, whereas factoring reduces this delay to 48 hours. For these companies, factoring is the largest short-term credit facility available; it is a very powerful cash flow lever. One out of every two B2B companies in France now uses factoring.
Maxime Bertin. Factoring is the fastest way for companies to support their growth, particularly for mid-sized companies (ETIs): this should really capture the attention of CFOs as well as investment funds. It is not widely known, but factoring is now the leading intercompany credit tool in France, as in most European countries.
T.R. It is also the cheapest short-term financing option, especially when compared to bank loans or traditional debt. Given rising interest rates and today’s difficulty for companies to access liquidity, factoring is an essential tool that should be deployed as a priority. From SMEs to large corporates, companies are not mistaken: we are already seeing this in the deals handled in the first half of 2023.
“The monthly outstanding amount of factoring finally crossed the symbolic €40 billion threshold in France again, a historic peak last reached in December 2019.” – T. Robet
What happened in 2022 in your market, and what are the trends for 2023?
T.R. Last December, the monthly outstanding amount of factoring finally crossed the symbolic €40 billion threshold in France again, a historic peak last reached in December 2019. In short, it took the sector three years to fully recover, with 15.5% growth, i.e. €421.6 billion of receivables financed in the French market in 2022. In this context, Fibus recorded 30% growth over its last financial year: nearly 10% of all commercial receivables financed through factoring in France in 2022 were handled via Fibus. In 2023, the sector is expected to continue its momentum, both domestically and internationally. International activity is in fact what drove the market last year, with 18.8% growth, and this trend is continuing in 2023.
M.B. It is important to note that the largest factoring players in the world are French: this makes it possible to structure multinational programs with a presence in each country and centralized in France. Today, we generate nearly half of our revenue internationally and operate in 32 countries. In two years, we expect to support clients in 50 countries. This is a major advantage for the investment funds we work with: we can advise them regardless of the geographical footprint of their portfolio companies.
How do you work with private equity funds?
T.R. Most of our clients are LBO-backed companies: we therefore work both with their finance teams and with their investment funds, and we are very familiar with their respective expectations. Private equity funds contact us either in anticipation of new acquisitions or to optimize existing portfolio companies. On this point, we are seeing renewed demand from funds, which want to ensure that their factoring programs are fully optimized in a constrained economic environment.
M.B. Factoring is not strictly speaking an acquisition financing tool, but it contributes indirectly in many ways. We have developed a dedicated offering for private equity funds, structured according to the different stages of a deal: pre-acquisition; signing to closing; and post-closing. If we are involved early enough in a new investment process, for example, we help secure acquisition financing and ensure financial autonomy through factoring.
T.R. After signing, factoring supports organic and external growth. It is always valuable to have a more reliable off-balance-sheet financing source than an RCF. Other key mechanisms for funds, such as dividend recaps or debt refinancing, are also facilitated by factoring. On the latter point, it is important to note that factoring complies with debt covenants. Finally, since exits are critical, we also help funds prepare their disposals. Our advisory offering is designed to support the entire investment lifecycle, fully or partially.
M.B. The current economic environment, likely to persist into 2024, should increase private equity funds’ vigilance in day-to-day portfolio management. In practice, financing working capital through factoring via accounts receivable is significantly cheaper than using debt or equity. Managing working capital and potential cash flow stress is at the heart of our business, with strong expertise in the international ETI segment: we have been supporting them for over fifteen years.
“Fibus’s DNA is to facilitate and simplify the implementation of factoring and credit insurance programs within ETIs,” – T. Robet
How can ETIs be helped to navigate a difficult economic situation in 2023?
T.R. Fibus’s DNA is to facilitate and simplify the implementation of factoring and credit insurance programs within ETIs, so that they can always operate at maximum financing capacity. This is why we launched ARI Trade this year, an IT solution that enables finance departments to ensure they are never under-financed across their programs. We have brought together all stakeholders of the receivables cycle into a single interface: group CFOs and credit managers, their factors and credit insurers. This is unmatched in the market.
M.B. With ARI Trade, we have eliminated the “technical layer” usually required by accounting teams to optimize cash flow: no more manual file reconciliations, no more factor format adjustments, no more credit limit requests contract by contract, etc. All communications with factors and credit insurers are automated, data is updated continuously in a single dashboard, regardless of the number of countries, currencies, or contracts involved. This saves a significant amount of time while ensuring that no financing opportunity is missed. Today, finance departments use ARI Trade as a prerequisite for implementing, optimizing, or expanding factoring and credit insurance programs. Thanks to digitalization, they can finally exploit factoring at 100% of its investment potential: we can advise them regardless of the geographical footprint of their portfolio companies.
Key points
- In 2022, Fibus (formerly Chateaudun Crédit) rebranded and expanded its three areas of expertise: Fibus Factoring, Fibus Trade, and Fibus Digital
- Fibus achieved 30% growth in its latest financial year
- 48% of revenue is generated internationally
- Over 50 new ETI and large-cap deals were handled in 2022
- Fibus has 49 employees across Paris, Poitiers, Lyon, and London
- In 2023, Fibus launched ARI, a suite of IT tools to manage and optimize factoring and credit insurance programs
About the interviewees
Thibaut Robet founded Fibus (formerly Chateaudun Crédit) in 2005 with Gaëtan du Halgouët. They specialized in working capital financing and became the leading factoring broker in Europe and a leader in credit insurance brokerage. Fibus advises all types of companies, primarily in private equity contexts for fast-growing ETIs. Maxime Bertin is Head of Factoring at Fibus.