Two male private equity heads aren’t better than one woman

The abruptness of Morgon’s ouster is fundamentally about the string-pulling of family capitalism a la francaise. While Morgon’s empire-building since joining Eurazeo in 2008 and her leadership style earned her plenty of critics within the male-dominated Paris set — grumbles ranged from her domicile in New York to her close-knit entourage, which is also moving on — it had the blessing of the firm’s founding backers who once ran investment bank Lazard, where Morgon got her start. The death last year of Lazard banking dynasty scion Michel David-Weill triggered a boardroom brawl that the Decaux family, even with only an 18 percent equity stake and 25 percent of voting rights, has won.

Shareholders have sound reasons to be frustrated with Morgon’s tenure. Eurazeo shares have done a round trip since her ascension to CEO in 2018. The firm’s 2011 bet on luxury puffer-jacket firm Moncler SpA was stellar; less so its investment in auto rental firm Europcar. Its headfirst dive into tech startups, with the blessing of French President Emmanuel Macron, exposed it to the interest-rate increases currently battering the hyped-up sector. Morgon’s total 2021 compensation of around 4 million euros ($4.3 million) might be par for the course in private equity, but minority shareholders — who have previously grumbled about managers’ golden parachutes and opaque rewards such as carried interest — are doubtless irate that costs have ballooned past revenue.

But little in the new structure inspires confidence; it smacks of opaque governance and indecision. The two new leaders are clearly experienced but seem ill-matched as a rotating duo, one coming from the world of private equity and the other from global investment banking. And while the Decaux family has talked up a “new dynamic” after Morgon, it seems to want to double down on the existing strategy of expanding in managing assets for third parties. Corporate talk of a more “collegial” management style doesn’t explain how shareholder-friendly ideas like cost control or transparency might emerge.

Rather than herald a new kind of investing edge or efficient structure, the Decaux intervention looks increasingly like a family waiting for a trophy asset to deliver. The entire private-equity industry is hunkering down for a market storm as an economic slowdown rips through a competitive buyout market. Rival firm Wendel SE has recently appointed a new boss, as has Carlyle Group Inc. But at Eurazeo, the conglomerate discount that dogs family investment vehicles remains deservedly wide. Alphavalue analyst Saima Hussain says governance issues remain, as does the likelihood of a further fall in the net asset value of its portfolio given the economic environment. She estimates Eurazeo’s NAV per share at 91.7 euros, 20 percent below current levels.

In the meantime, Paris has lost one of its few women leaders and a spokesperson for diversity in an industry struggling to prove it can do better. In 2020, more than 250 private equity firms in France pledged that women would make up 40 percent of their investment teams within a decade; a new law also requires companies with over 1,000 staff to appoint women to 30 percent of senior leadership roles by 2027. Both look like a bigger stretch after Morgon’s departure, with Eurazeo already more male-dominated than most big listed French firms even if the new executive board includes a woman. As flawed as Morgon’s tenure was, its end signals that private equity remains one for the boys and the billionaires. Lionel Laurent is a Bloomberg Opinion columnist covering digital currencies, the European Union and France. Views are personal and do not represent the stand of this publication.

Credit: Bloomberg