Bpifrance is a bank like no other in Europe.
The French lender has made more than €50 billion ($56 billion) in loans to small and mid-sized businesses and has €52 billion in stakes in almost 1,000 companies. It has backed everything from a startup wanting to take tourists to the edge of space in balloons and a chain of trendy Parisian nightspots to the automotive giant Stellantis NV. A force to reckon with on French deals for M&A advisers like Goldman Sachs Group Inc. and JPMorgan Chase & Co., it has lured away bankers from firms like UBS Group AG and Rothschild & Co.
Its role currently in the midst of two high-profile leveraged buyouts places it yet again at the heart of French corporate transactions.
No other European country has an agency quite like Bpifrance: a for-profit, state-owned merchant bank with a mandate to foster national champions. Its wide-ranging lending activities are financed largely by borrowings guaranteed by its ultimate backer: the French taxpayer. And for all the political turmoil at the moment in France, its interventionist policies are likely to find favor no matter which coalition — from the left or the right — ends up forming a new government.
More than a decade after it was created under then-President François Hollande and his economic adviser — one Emmanuel Macron — Bpifrance exemplifies 21st-century French capitalism: Entrepreneurs build businesses with cash, nudges and nurturing from the state, which in turn wants them to create jobs at home and develop innovative technologies. Explicit in the deal: The government will fend off foreign interlopers if necessary.
Across the world, the history of state intervention in the private sector is replete with disastrous examples costing taxpayers billions because of inefficiencies and resistance to necessary market-driven reforms like job cuts and plant closures — British Leyland and British Steel in the UK and Areva and Pechiney in France, to name a few.
But for Nicolas Dufourcq, the 61-year-old former telecom executive who has run Bpifrance since its inception, his bank’s mandate is different. It’s a model for the region, he says, pointing not just to its financial results — it earned €1.1 billion last year — but also to the way it encourages business creation and risk-taking.
“We’ve also been able to develop a very large entrepreneurial ecosystem,” he said in an interview. “In Europe, everyone is gradually equipping themselves to make their own Bpi.”
That remains to be seen.
Bpifrance’s investment prowess and risk management haven’t really been tested because Dufourcq hasn’t faced a prolonged economic downturn, enjoying a favorable wind at his back almost from the start — even during the pandemic, when the French state opened the cash taps to prevent businesses from going under.
Its stock-picking bets also haven’t always paid off. A stake in train-car maker Alstom SA, for example, has lost about a third of its value since the investment early last year. Shares of Stellantis, in which the bank has a 6.4% holding, have slumped about 45% from their peak in March as the carmaker struggles to fix problems at its US and European operations.
Also, for much of the bank’s existence, it could finance itself at rock-bottom interest rates, something that’s no longer the case. A slowing economy and higher rates also may start to hurt companies that borrow from the bank: Bpifrance’s loans classified as doubtful stood at 4.7% at the end of 2022, up from less than 4% in recent years, according to the bank’s annual reports. It didn’t disclose the statistic in its 2023 report.
Dufourcq shrugs off such concerns, noting that the three decades-old agencies that combined to form Bpifrance survived some deep financial crises, and says his bank often says no to risky investment proposals.
While some European countries have national development banks, Bpifrance is unusual for the breadth of its offerings. It operates 50 offices around France, often sending representatives door to door to drum up business. In addition to debt and equity investments, it offers financing and credit insurance to exporters and training and consulting services to entrepreneurs — including on how to shrink their carbon footprint.
With about 3,900 employees and two offices in central Paris — including one with spectacular views of Montmartre and the French capital’s famed rooftops — Dufourcq’s bank has big ambitions, although his attempts at broadening its reach haven’t always gone well. Efforts to create something like a sovereign wealth fund and a mutual-funds entity have run into issues with the national auditor.
In 2020, Bpifrance launched Lac 1, a sovereign wealth fund to take stakes in listed, multinational French companies to help them fight off would-be hostile bidders. Dufourcq wanted to raise €10 billion for the fund through roadshows, but the Covid-19 pandemic forced him to scale back ambitions and settle for €4.2 billion, about a quarter of which came from Abu Dhabi’s sovereign fund, Mubadala Investment Co.
Then, in 2020, Bpifrance began offering mutual funds to individual investors: For as little as €1,000, French savers could invest in private equity and venture capital vehicles typically reserved for the ultra-rich or pension managers. Dufourcq pitched the products on TV, and Bpifrance ran ads online and in newspapers and magazines.
In both those activities, it was slammed by the Cour des Comptes, the French state’s national auditor. Lac 1’s plan to eventually sell shares of the companies it’s invested in was contrary to Bpifrance’s “objectives of capital stabilization and national sovereignty,” it said, while also pointing to the irony of a fund defending strategic national companies with cash from a foreign sovereign wealth fund.
On the mutual funds, the auditor questioned Bpifrance’s competence for a foray into the retail market, also noting that it isn’t “one of the missions assigned by law to the public investment bank.”
Bpifrance responded that all of its activities are conducted with the backing of its board of directors — and thus of the French state. Lac 1 is within the mission assigned to Bpifrance of providing shareholder-base stability for France’s big companies, Dufourcq wrote in response to the report. Despite having outside investors, the fund retains total independence in its investment decisions, he said.
As for funds targeting retail investors, they were launched at the explicit request of Finance Minister Bruno Le Maire, he said, adding that the project has encouraged other institutional investors to put money into French companies. The funds have been so successful that Bpifrance plans to launch another offering next month.
Lac 1 has invested in a slew of companies from chemicals maker Arkema SA and Elis, which provides linens for hospitals and hotels, to cybersecurity firm Exclusive Networks SA and goods-inspection business Bureau Veritas SA. The fund tends to buy about 5%, with members of its investment team getting board seats. Those holdings are in addition to the bank’s stakes in such strategic companies as former state phone monopoly Orange SA and chip maker STMicroelectronics NV, where Dufourcq is chairman.
“Companies wanted us to buy into their capital, to be the cornerstone — patient, long-term,” Dufourcq said.
While it provides stability, the bank’s involvement can constrain companies in decisions like shutting unproductive factories, or moving production to low-cost countries, a common problem when states invest in the private sector. “The objectives of the government owners are not those of shareholder wealth maximization,” said Kateryna Holland, an assistant finance professor at University of Missouri who has studied state investment in the stock market.
Still, Bpifrance’s clout gives the French state a powerful voice when a company becomes a takeover target. For Dufourcq, how the bank deals with foreign bids for companies it’s invested in or sees as strategic “depends on the circumstances.”
Two such cases are currently before the bank. There’s a €2.2 billion bid for Exclusive Networks and a politically charged effort by Les Laboratoires Servier to sell its generic-drug business, Biogaran.
In the case of Exclusive Networks, the company’s board — which includes a Bpifrance representative — voted unanimously to welcome the bid in July from buyout firms Clayton Dubilier & Rice and Permira. On Biogaran, Bpifrance agreed to join private equity firm BC Partners’ bid in return for a pledge that the business would remain in France with a headquarters in the country, a person with knowledge of the matter said, effectively rejecting offers from two Indian generic-drug makers. Bpifrance declined to comment on both deals. BC Partners had no comment.
For startups, meanwhile, funding from Bpifrance has been critical.
“Without Bpifrance, a big bunch of companies like us wouldn’t exist,” Thomas Clozel, co-founder and CEO of Paris-based biotech company Owkin Inc., said in an interview.
Owkin, in which Bpifrance invested in 2020, uses artificial intelligence to identify new drug candidates — cutting-edge technology that France doesn’t want to lose to Cambridge, Massachusetts.
A Bpifrance investment is also a stamp of approval for other investors, says Vincent Farret d’Astiès, the founder of Zephalto, a company that aims to take passengers into the stratosphere in balloons for €170,000 a pop.
“It’s a guarantee because people know that a fairly serious organization has looked at the dossier,” he said. “It adds credibility.”
Dufourcq, for his part, relishes the job of wooing entrepreneurs. On a rainy afternoon in May, at the Vivatech startup conference, he wandered through the sprawling convention center, stopping to shake hands, touch items on stands and ask questions, drawing a crowd when he stopped to give a radio interview or allowed people to take selfies with him.
The executive promotes Bpifrance’s model whenever he meets with counterparts from other nations.
One sign of its success, he said, is that over the past decade countries from the UK to Finland to Germany have broadened their financial backing for companies in the mold of Bpifrance. The UK government in 2018 created British Patient Capital, a venture investment firm, while Germany’s development bank founded a venture agency, KFW Capital, the same year.
“Everyone is copying,” he said.
