Finance / The Big Interview: Sophie Javary, BNP Paribas

The Big Interview: Sophie Javary, BNP Paribas

Sophie Javary, deputy head of corporate finance at BNP Paribas Corporate & Investment Banking, has just arrived from Paris as she greets me in the boardroom on the top floor of the bank’s London headquarters.

Sophie Javary

She is based in the Paris office, but is in London today for meetings. The bank’s origins are in Paris, and many of its workers travel back and forth between the two capitals. There as many French accents as there are English drifting around the office, which has a culturally diverse feel about it, Paris chic meets iconic London.

Starting as a credit analyst at Bank of America 25 years ago, Javary, pictured, has risen to the top of her game. She has achieved the highest decoration in France, the Legion of Honour, established by Napoleon in 1802, in recognition of the work she has done in the finance sector. She says: “I did a lot of privatisation work for the French government and was involved in a lot working groups with the market authorities. I helped start the process of book-building in equity capital markets.”

In January, she was promoted from managing director to deputy head of the corporate finance department covering Europe, Middle East and Africa. She explains that exit strategies can be triggered by many sorts of factors, such as debt reduction, rationalisation of a business and taking advantage of valuations. Javary says: “Sometimes you have companies that have a higher level of debt and want to do asset sales to reduce the level of debt and be less under pressure by the ratings agency.

“Companies may want to rationalise and focus on the core businesses. They also may want to take advantage of valuations, where in certain areas of the business it can be effectively more attractive to sell part of the business rather than hold it within a group.”

Her teams have advised on many high profile deals, including the sale by French media group Vivendi of its telecom business SFR.  She says: “We advised Vivendi on the sale of French telecom firm SFR. Clearly that one was triggered by the fact that Vivendi wanted to rationalise its portfolio of activities and wanted to be focused more on its media business. Vivendi was seeing there was attraction for telecoms business, and that SFR would probably fit better with another shareholder than Vivendi, and it was sold to cable firm Numericable. We are seeing a trend for cable and mobile companies to create synergies between each other.”

According to Javary, the Numericable and SFR transaction was a logical move for the companies to move to the next level, and she is seeing similar things happen in other companies. For example, Vodafone bought Spanish cable company Ono to aid its growth strategy for Europe. Javary was also involved in the sale of French media firm Lagardere’s pay television business Canal Plus to Vivendi. Lagardere had a minority stake in Canal Plus and did not have any influence over its strategy. She says: “There was a lot of pressure from Lagardere’s investors on why they had such a large stake in a company, when they did not run it themselves.

“Lagardere last year divested from its stake in Airbus parent EADS. Its stake in the company dated back 20 years and it did not really make sense to only be a financial investor as a company like Airbus did not need any more strategic shareholders such as Lagardere at the outset of EADS.”

Companies can also be forced to sell assets as a result of a merger if they are not in the interests of fair competition. Javary says: “Following their recent merger, Swiss building material group Holcim and cement firm Lafarge are going to be forced to divest. The impact this merger has on their competitive position is against anti-trust regulations in Europe. They have decided they will appoint a special committee that will be in charge of overseeing those asset sales.”

Debt can also be a reason why companies have an exit strategy. She says: “Ten years ago, after it had bought Orange in the UK, France Telecom had so much level of debt that it had to exit from a number of companies just to reduce the amount of money it owed.”

Although some companies are restructuring and selling assets because of debt, the current low interest rate environment is also fuelling acquisition activity. She says: “You have a very liquid high-yield debt market with low interest rates. There is a capacity for private equity investors to go after these assets that sit within corporates’ balance sheets in a very aggressive way. Exit strategies will be a function of these markets and we will see some corporates taking advantage of this particular situation.”

But it is important to get an exit strategy right, so businesses involved can restructure or continue to grow. She says: “What makes a good exit is that it first has to make sense within your own strategy for your shareholders and investors. If it is something that nobody understands in the context of the overall vision of the management of the company then I think that is what can first go wrong.

“The second thing is that often corporates are careful about the impact on management and employees of the divested business. Very often, they are concerned about protecting the employees that are effectively going to be in the exited units. You do not want to disrupt a business you are trying to sell. It can have a ripple effect on management, employees and the activities you keep.

“The third element is the choice of the new shareholder. Corporates want to make sure the assets that they have divested end up in safe hands in terms of the future of the divested unit and there is not too much debt put on the future company.

“One way is for the company that divests to keep a minority stake in the business that it divests from, in order to make sure it effectively continues to have a say from the board on the decisions that will be taken in the future.

“The last thing is how well the process is run, which is why advisers must be chosen carefully. Often those companies are listed so naturally there is a need to have transparent processes with the market authorities that look after these transactions when they are big.

“Because of the nature of these exit strategies, where you have to have perfect execution, you have to have trust. The fact you have a long established relationship with a seller who is exiting is a factor which is important in terms of making sure the banks and advisers are able to keep confidentiality. Banks that have been retained are often close to the company for a long time and have long established relationships – the relationship angle is important.”

Exit strategies are a part of a business’s life cycle. They can help firms grow, develop and rationalise, or help them get out of a debt situation – the kind of strategies Javary will continue to spearhead when she returns to Paris.