Eurazeo to exit first US investment, will see a 3.1x realized return

'We were already looking for online marketplaces and had forged a conviction around the space and its strong pillars,' said Eurazeo’s Vivianne Akriche.

Eurazeo has agreed to sell its remaining 51 percent stake in US-based digital marketing company Trader Interactive to Carsales, on an enterprise valuation basis of $1.9 billion, according to reports. Eurazeo invested in Trader in 2017 – the first US investment for the France-based firm. This transaction represents a realized return of 3.1x for Eurazeo and its affiliates.

Eurazeo is headquartered in Paris and has over €30 billion of assets under management, of which close to €10 billion are from the firm’s balance sheet. The firm has offices in 12 countries and four continents.

PE Hub interviewed Vivianne Akriche, managing director at Eurazeo in the firm’s mid-to-large buyout strategy group, about why the firm saw potential in this asset and what was done during the hold period to make this a successful investment.

Akriche has been with the firm for almost 18 years. She specializes in the tech-enabled business services and consumer sectors and has notably participated in the structuring and/or oversight of investments in Rexel, Moncler, Grandir, WorldStrides, Sommet Education, Trader Interactive and more recently Scaled Agile. She was also involved in the strategic acquisition of Eurazeo PME. Before joining Eurazeo in 2004, she was part of the investment banking team at Goldman Sachs in Paris.

“Trader was our first investment here in the US and is a very good representation of our investment approach and playbook,” she told PE Hub. “A key element of our investment strategy is to be the partner of choice for management teams.”

The firm won the bidding war through a “competitive process thanks to the very strong alignment we were able to build during the due diligence process with the CEO and the management team around a common strategic vision. When it came down to choosing a winner in the auction, management was rooting for us.”

Trader is a platform of online branded marketplaces across four different verticals – RVs, powersports, equipment industries and commercial trucks – with several brands in each of those verticals. The company had built strong brands and strong competitive positions.

“We had identified this business before it came to the market because we were doing some work around the global shift of marketing spend from paper to digital,” she said. “Typically, online marketplaces, such as Trader, are the beneficiaries of this shift to digital.”

Akriche said that the firm was already looking for online marketplaces and had conviction around the space. “That’s generally our approach. We’re very thematic in our sourcing and we look for strong, long-term tailwinds that you can bet on.”

The firm believed that Trader was and is uniquely positioned in the value chain as they’re a connection between sellers and buyers.

“Trader Interactive facilitates about 26 million connections per year. In both RVs and Powersports, Trader Interactive has leading market positions,” Akriche said.

This investment benefited from other factors: “Typically, with strong market shares and a strategic positioning between buyers and sellers, you have a lot of resilience, a lot of stickiness. So, there was strong downside protection, which is the second criteria that we look for.

“With such competitive positions, you have good pricing power. And then another investment criteria essential to us is optionality,” she said. “Trader was present in four different verticals. Some of them were still very much fragmented and it presented opportunities for strategic M&A.”

Four-pronged strategy

There were four main strategic actions that Eurazeo drove at Trader. The first one was around investment in the team.

“We were very much in alignment with the CEO around expanding the tech team,” she said. “The company brought in a new CTO who came from Microsoft, a new VP of SEO, and a new VP of data. We really built out the tech team.”

The firm is also a big believer in ESG, which was another foundational aspect of the investment strategy.

“We encouraged diversity at the company,” she said. “By the end of our tenure, 80 percent of Trader senior executives were diverse in either gender and/or race. We also encouraged the creation of a DEI committee.”

The second area the firm invested in heavily was the product.

“A lot of efforts were made to revamp SEO capabilities, leading to double-digit growth in platform traffic year-over-year, bringing more and more people to the website,” Akriche said. “We also introduced new calls to action for people to reach out to dealers and get more information. All these efforts led to a significant decrease in lead prices for dealers.”

Then, the firm focused on enriching leads for dealers, enabling them to search the behavior of potential buyers more efficiently.

“By considerably investing in the product, we really reinforced the value proposition for dealers,” she said. “This led to the third strategic action that was integral to our strategy, which was around pricing. With all this investment and very strong competitive positioning, being at the nexus between buyers and sellers, we were able to roll out a new, ambitious pricing strategy. We worked with outside resources and the management team to put together a long-term roadmap to benefit from this pricing power over the long term. With our customer dealers, that’s really paying off now, especially in the current inflationary and macroeconomic environment. We are delighted that the company is now very well equipped to implement these pricing initiatives,” she said.

One of the last levers to be pulled was M&A. During the hold period, Trader had two add-on acquisitions that were public and one that has not been disclosed as of yet.

In January, Trader added Statistical Surveys, and then in February it added NextTruck, Rock & Dirt, Tradequip and Trade-A-Plane marketplaces from The Cosby Harrison Company.

“Two of them enabled the company to consolidate its market share in some of its verticals, which is a fundamental value proposition for marketplaces,” she said. “The third acquisition was a data company that enabled us to provide even more value-add in terms of information for dealers.”