Wendel (MF) Earnings Call Transcript

Well, good evening -- good morning to everybody. Thank you to all of you to have free up some time to come to this meeting. And it's an important one because it's where we think we announced an important strategic step for Wendel. If we come back to what we've announced on March 16. Remember, we've announced different initiatives that we're taking. The first one was to implement an active portfolio management and investment policy. And since March 16, we've done a few things like the acquisition of Scalian as where we invest roughly EUR 560 million in equity, in a fast-growing and cash-generative company, and we think that will benefit from significant potential to grow based on the digitalization and the decarbonization megatrend. Now target is really to lead this company to a point -- EUR 1.5 billion of revenues by -- within the next 5 years and really to increase its growth. We think it's a great platform for us to have an investing team. We've announced also the sale of Constantia Flexible for EUR 1.1 billion of proceeds. This is a value which is above the latest NAV publication showing that -- first of all, NAV is always calculated on prudent basis and the fact that we are willing to take any opportunity when we need to do. This is one of the largest transaction in that sector at this period, and it allow us to redeploy this money in a more highly -- higher return potential companies in the future. And we've also made the exchangeable bonds for Bureau Veritas, EUR 750 million have been raised at very low cost with a significant positive carry, again, given financial flexibility to the group at a limited cost with exchange at, what, EUR 32 per share, if I recall well, showing that it is, I think it was a smart move. We've been a very hands-on investor, and we say we really want to be an active player with our portfolio company. This is illustrated by the acquisition of ICP by Stahl, which is really moving into performance cutting company, which we think will be very good for the valuation of Stahl long term. We have supported Constantia Flexible for the acquisition of the Drukpol Flexo in Poland and a company in Hungaria. And also, we are in active discussion, as you know, with IHS in order to improve the governance of IHS, which we think is important to create value with this company in the long term. We've been -- and I've said, we will have some active involvement with Bureau Veritas, which is our largest investment and since then have taken the chairmanship of Bureau Veritas. We've got a new CEO, which is Hinda Gharbi that has been appointed and confirm as CEO and Board and Hinda is working on preparing strategic plan oriented in value creation, which we think is important for that very important investment for us. I've said at that time that one of our key ambitions was also to become and to create a third-party asset management activity. And really today, we announced the first step of that plan. The acquisition of IK Partners and I will come back on that, is really unique opportunity for us. It's a unique European mid-cap private equity firm, and that will help us really developing that. It would be the basis of developing our third-party business. This will generate long-term recurring cash flow for Wendel. This will also create value through the carried interest potential. So the capital appreciation of the investment made by the IK team. And also we will have potential returns on the sponsor money we will put at work within IK together with through that sponsor money, helping them to grow faster. And I'd say new financial policy, we said we had a clear dividend policy, 2% of the NAV as a target above the 1.6%, 1.7% historical distribution. Great active liability management, and we've got a debt maturity extended by 5 years, which we've done before the summer. And I think it was also a smart timing. And again, we announced today our intention to do some share buyback, EUR 100 million we announced today given the fact that we think that the discount on the share price is too high. All of that has as an ambition to give a double-digit average TSR, and we know that if we want to significantly improve the value of this company. We need to deliver on all those strategy, strong NAV appreciation through performance. So we think really this is the right time to build an asset management platform through an acquisition. The -- as you know, within the private equity industry today, this is a turning point. Fundraising is more challenged in -- for all the GPs throughout the world for reasons that we all understand the fact that the interest rate has gone up, which changed the -- what we call the denominator impact and many elements around environment in terms of macroeconomics, which means that today, only the good company can raise fund. And you will see we think IK is one part of these good companies. This is also a period where there's transmission of equities through generation and it's more and more difficult to do it without the help of third-party helping to do so. There is a strong willingness of GPs to back to large institutions that can provide permanent capital and then there is a significant consolidation trend in the industry. So this is really the opportunity to acquire a living platform for us to kick start Wendel's third-party asset management activity. To be fair, I don't think we would have been able to do so a few years ago because I don't think any of those asset manager would have been available, at least not at a reasonable price and even if they had been available, we think that this -- the fact that we do third-party asset management by using -- by acquiring a third-party platform will help us growing much faster this business than we would have done it by ourselves. We have the basis of a very established brand name, a great track record, specialized teams and talent and specifically, you'll see IK structure is very, very strong. This is -- they have demonstrated fundraising experience with a very strong LP base, diversified base from all over the world and it's, we think, a very attractive portfolio of assets. So I think it gives us the ability to really use that as a basis of a growth platform. Now if we look to what do we want to do in third-party asset management, we really want to create a sizable and comprehensive third-party asset management, boost by acquiring selective teams or GPs, but also by developing organic growth on this basis and generating significant value, and this value will come from 2 things: cash flow generation because this is really cash flow company. They will generate significant revenues to model on a regular basis, thanks to the development of the management fees but also capital appreciation through 2 elements: carried interest on one side and sponsor money return on the other side. And last but not least, we think that doing that is creating a business through Wendel [indiscernible] will create value by itself, that the GP we invest in or that we -- the business that would develop will value itself significantly in the future. Our target operating model here is really to create different verticals where we want to develop expertise. The first one, obviously, and I've mentioned that because the most obvious one is the private equity sector. The buyout sector where really IK rank and really bring us the ability to develop that. But tomorrow, we may say that we want to develop for the other verticals at infra or private debt or secondary fund. So all of those should -- our potential development. What we really want is to create a sort of multi-expertise platform with clear separation from permanent capital on the other side, where we bring the ability to bring sponsor money we're controlling the different verticals we're doing. We can co-invest and we lead the strategic decision. And so that platform will create synergies on cross-selling on strategic clients, on developing retail or wholesale initiative to raise fund or by creating an operational backbone that will help us reducing the cost of that and also reducing the cash burn at Wendel level. I will come back to that, but this is also important. This is -- will help us simplify our own organization and reducing our own cost going forward. So IK Partner is really -- this acquisition is the first major step in building Wendel's third-party asset management platform. This is the acquisition of a leading and fast-growing mid-market European private equity firm. And if I'm to make it, it is really the perfect fit to us because this is highly complementary to what Wendel is currently doing with this long-term money. And there is no or very little, there's even low, but very little overlap, which means that it's not like there will be competition between the balance sheet investment strategy and the IK investment for its LPs. And we've seen that from the very beginning with Chris Masek and his team, which I think is very important. There is a potential, as I said for synergies, operational efficiency on the organization and we're going to work on that to reduce the cash burn at Wendel level and enhancing the attractivity of Wendel as a shareholder of choice. We will bring ability to manage more efficiently our global investment platform. This is also an opportunity to leverage Wendel permanent capital to invest sponsor money in IK future funds, which benefit for us as an investor from their track record. And if you look to the numbers. We will come back on that is very high. But also when you put sponsor money, it's a way to show that the GP order is really putting its money with itself is really believing in the strategy that is done and help growing the business faster, and it's an -- or support new initiatives that may be taken, which again, is a factor of growth in the future. And if you look long term, this is really devoting and that will not be done on what day, but long term pivoting Wendel business model towards more recurring revenues and profitability in the future. So really, we think it will bring significant value creation for Wendel and shareholder, return on sponsor money, acceleration of growth, recurring dividend and because we -- the objective of the investment platform is to distribute mostly 100% of what they generate. And we will also have access to performance-related earnings, which is represented by the carried interest. A little bit of a word on IK itself. IK Partner is really one of the best company to enter the buyout segment as we view it. Growth are realized by the teams on realized is 26% gross IRR since 2013 or 2014. Why do we start that? Because that's when the current team took the position at IK. This is top quartile in terms of IRR. And also, they have top quartile DPI, which means that it is really a company that is returning money to its investors on a consistent basis. It has critical size. It's close to EUR 12 billion AUM, 4 scalable strategy: mid-cap, small cap, def cap and partnership funds. It's a good resiliency of the small and mid-cap market in terms of valuation and exit opportunity liquidity. You know that large cap is a good market with a large opportunity to deploy money, but it may sometimes close itself, which is not the case for the mid-cap market. And I think it's a great position to be. But to capture the mid-cap market, you need to have a global infrastructure to do that. And that's really what has IK and they've built that throughout time. It's 185 people out of which 100 investment professionals. They have developed the right size to develop a capital market team of first class. They've got operational teams, operating partner, active in order to enhance the value of the company they're investing in. They have good sector specialization and they've got a great diversified blue-chip of limited partners of LPs investing in their fund. And they have one of the -- well, probably a unique European footprint with presence in 7 different locations in Europe, deep knowledge of the local market, which is key in developing the small to mid-cap market, and they have a really strong diversified proprietary deal flow, which is really the source of their long-term superior return. This is a great team, very experienced. They are 30 years plus of experience, tenth generation of funds for the flagship strategy, 14 funds have been raised in total, long-term commitment with significant investment for the team in all funds, and it is truly multicultural and multigenerational organization. So really very solid. It's not a sort of a company that only depend on a few individuals. This is a true organization pan-European that bring significant value, thanks to the platform that has been built, and thanks to that, they delivered superior results. Their AUM growth has been above 15% since 2021. Their estimated management fee will be above EUR 150 million in 2024 with pretax FRE, which will be above EUR 60 million. Why do we communicate pretax FRE? Because the way we structure the transaction means that the tax rate will be lower than regular tax rate because we will integrate that directly into our own tax organization, which will help us generating some synergies on to that. But -- so to go from the pretax FRE to the net, you only have the tax. So IK Partner overview. I think you've seen that on next page, which really reflect what I've said. So probably I don't go back on all of that, you see that they have invested EUR 19 billion plus since inception, 116 transaction realized. They've got 2.7x multiple on money has been realized. And EBITDA growth on those were 90%. What is very important is that the performance of IK is not done by a few investments that are making great returns and the rest is mediocre. They have very low loss ratio, 1%, and it is very consistent throughout the investment they've made. And that is, I think, an element of quality that is very strong.

Maybe just to add on the investment strategy. They have a very balanced strategy with roughly 20 investments per fund, so quite diversified, and are taking -- they're very careful in terms of industry diversification and they do intend to have some business services, health care, consumer and industrials in any single fund as well. So they take care of the balance in terms of geography, in terms of sectors, in terms of number of assets to make sure that every single fund is quite diversified.

Maybe you can keep on the next.

On Slide 9, turning to Slide 9 and presenting IK. And first, on the left side, the mid-market that Laurent mentioned. So it's a very deep market with a lot of deal opportunities as they have a coverage of the whole Northern Europe as they have access to over 100 opportunities every year. It's a sector where valuations at the entering point is more attractive than the larger markets as well, and there is a lot of depth in terms of bolt-on acquisitions. So you can access acquisitions at a lower multiple and you have the benefit of diluting the entry multiple by doing accretive bolt-on acquisition on this market as well. As Laurent mentioned, the financing and the exit options are not always available, but most of the time available. So in the current environment, for instance, where it's so hard to find financing for EUR 1 billion plus of leverage, you can still operate in this attractive mid-market LBO in Europe.

And I have realized several sale during the year 2023, which is a good illustration of that situation, in good conditions, which is really one of the attractiveness of what they've been doing.

So in this attractive sector, IK has a pretty unique position that you can see that have been the most active one in Europe over the last few years. They have an in-house ops team with over 10 people helping the companies to improve their operations. They have an internal capital markets team as well, very active to optimize the financing and have a very good ESG team as well. So a good market where they operate with a very strong and diversified team.

As you see on next page is the growth of the AUM of IK, 10% from December '21 to December '22, to 21% in then, EUR 11.8 billion including EUR 1.8 billion of coinvest. EUR 3.6 billion of dry powder, which I think is very important because it gives them the ability to take the opportunities that are there potentially on the market today. Now let's move to the transaction itself. Well, we're -- this is a people business. And when you buy a GP, you're not buying an organization, you're buying people and if you want that to be successful in the future, you need to make sure that you align interest of everybody. And that's really what we've been trying to do when doing this transaction and discussing with Chris and his team, it's a real partnership we're creating with themselves, and that's what we valued a lot. We're buying on long-term 100% of IK Partners from the partners, but we'll do that throughout time. First step is we're buying 51% first day, together with 20% of the carried interest starting from IK X, which is the current fund they have been -- they are raising and which is important, the 80% will leave to the team. And then we're committing on both sides to acquire the remaining 49% over time, starting year 5, up to year 8 at a condition that will be dependent on the performance of the -- obviously, the earnings but also the growth that will be relied, which will imply the multiple we will pay on it. So there is strong alignment of interest of everybody, both on the performance and the ability to raise fund in the future. The price we're paying for the 51% is EUR 383 million of IK Partner, which encompass, obviously, the 51%, but also 20% of carried interest. The remaining, as I say, will be bought by Wendel from 2029 to 2032. All partners are staying. No one is selling, it's pari-passu, they're all staying with the same level. So what -- which is very important, they are committed on a long time, all of them. I say 20% of carried of all future funds will go to Wendel. The transaction will be financed with the cash. We are very cash risk. So we do that. And the implied pro forma loan-to-value will be at 10%, including anticipating the participation that we will have in IK X fund as a sponsor of money. The closing of the transaction is expected in the second quarter of 2024. So next slide is showing you really well how it works. So 100% of the GP EUR 60 million pretax FRE, as I mentioned. And so we're buying immediately 51% plus 20% of the carried, if you value at 0 the carried that make a 12.5x pretax FRE for EUR 383 million. We're paying that in 2x, cash immediately at closing, EUR 255 million, and an additional cash will be paid in 3 years with some, I would say, yes, good lever provisions, as we say, which means that it's depending on the fact that people are still within the company at that time. And then there's a long-term alignment, as I say, the 49% through a put/call mechanism that will be paid over time, depending on the performance of the company. This is a transaction that is aimed at preserving IK capability to deliver. Okay. I think we are back, we've been disconnected, hopefully not too -- I don't know when. So I'm starting again about the transaction structure about -- again, where -- what we want is to make sure that we've got a balanced governance so that we can make sure that IK teams are able to deliver superior return to the LPs through preserving their investment style and the way they've done it in the past. So -- and that is, as you know, very important to limited partners to make sure that they can rely on a stable good quality team. And so there will be full independence on the investment committee, which will be fully independent of the strategy of Wendel on its own balance sheet and the IK Partner management will have day-to-day management of the team. It's a long-term partnership. A long-term partnership means that the IK Partner will reinvest a significant portion of what they receive into the funds of IK. And as I said, a put-and-call mechanism is creating the also long-term interest, aligning the interest of everybody and specifically, Chris Masek, IK's CEO, has taken the commitment to remain in place as a CEO for the next 6 years. No partner is leaving from that transaction. So this is very important. Obviously, everything about the strategy, the other side of the company will be done through the Board, which will be chaired by Wendel. The alignment of interest is also that as the GP, we will invest as we sponsor money with a maximum of 10% of any fund so that there is no over position of Wendel as an investor. We have the -- we shared the carrying interest upside, which means that we are also very much interested in the performance of the fund themselves to the carried interest, which is a way to strongly align the incentive. The remaining 49% of the GP is also a strong alignment of interest in the future. And I think we mentioned that there will be strong complementary in terms of investment side, but clear separation in terms of governance between the investment in the IK funds on one side and the investment on the balance sheet on the other. Hello, are we still on? Yes, we are. Okay, sorry. Okay. We are continuing then. Can we move to next slide, which is really what -- where do we want to go as a new Wendel is really to have, on one side, a permanent capital that is here to generate long-term revenues strong investment and creating value on investing on, as I say, priority non-listed asset control assets with a target that we've announced when we were in March with an objective of how can you say -- we have no duration by principle. We can -- sometimes they have good opportunity to resell an asset that has been invested. But it's also a strategy where time can be an element of the value creation you want to say...

No exit horizon.

No, exactly. And I think it's one way to create significant value coming forward. Most of that will generate potentially values through capital appreciation and potentially capital gain, but also some of the participation through dividends. And on the other side, what we want is to generate a fee structure through the third-party asset management that will create significant recurring earnings to Wendel, but also capital appreciation through the carried interest or the value of the sponsor money invested into that platform. This platform will grow both by leveraging the ability of IK to develop itself through organic growth, but potentially also on selected external growth when opportunity raise, and we think they are giving us access to first-class teams. This is, again, I think, a strong value creation even for shareholders and a major step in Wendel's new strategy where -- next slide, net asset value, enhanced growth profile through the value of IK Partner GP, creating value in the future. 20 of the value of the carrying interest and also the valuation of the sponsor money in [ Ireland ], but also by creating recurring cash flow to Wendel, which will help Wendel generating higher dividend policy in the future that will be true because we will have significant and regular cash flow because we will reduce cash burn and because we will receive true operating costs synergy and because we will receive the -- not yet now, but in the future, the 20% carried -- realized carried interest. So I think it will improve business model and equity story. It's a major step, and that should accelerate growth in our net asset value, together with allowing significant growing dividend stream in the future. We are -- Page 19. So this acquisition of IK bring a significant benefit to Wendel. It's a first step in delivering the announced strategy to build a third-party asset management platform. And it's IK is really a leading pan-European small cap buyout investment platform. This is a unique and privileged exposure of Wendel to a suite of blue-chip limited partners and seasoned team that is led by CEO, Chris Masek. It's -- they have strong fundraising track records since inception and they're a very well-known brand, and they have high reputation in the market. This is, I think, a remarkable growth track record, providing recurring fees and consistent top-tier investment performance. They have a diversified and complementary investment strategy with a clear governance framework, alignment of interest and increased resilience and the acquisition is recommencing the Wendel diversification strategy in the asset management, which is a pivot to a new, more resilient and value creation model. So a major step towards this, together with a modest investment, if you look to the size of the investment compared to our global NAV. On the same time, we are still working on actively making value through our portfolio, which is also an element of value creation in the long term. And again, the Scalian acquisition is a good illustration of that, but it's not enough. And last but not least, as I mentioned, we have the intention -- we cannot that -- to buy back shares because we think the discount on the shares is high, and it's a good timing to do that. And I think it will create value for our shareholders doing that. And obviously, this is one program, but we're not -- but we can do more if needed. This is it. And you will have more detail -- and this is rendezvous all of you, we have our Investor Day on the 12th of December for the Investor Day. And during that period, we will talk about our strategy more in length, maybe we'll do but also we will have, I think, a very interesting presentation of IK Partners by Chris Masek and probably a few of this team members. We will also have a presentation of Scalian by [ TIM ]. So I think it will be a pretty interesting time to share together. Thank you very much for your time and patience and we are here to answer any questions you may have. By the way, I am here with David, and you've heard him during the presentation, with also is [indiscernible] with Cyril Marie and with Benoit Drillaud, our CFO.

[Operator Instructions] Your first question comes from the line of Geoffroy Michalet from ODDO BHF.

Congratulation for this interesting deal and structured in a smart way. A couple of questions for me. First 1 on the net profit of IK. You touched a bit around it, but to sum it up, we have to guess that it is lower than the traditional, let's say, French or European tax rate. Second question on the asset under management. Part of those core investment, actually quite a sizable part. Can you explain us if you get money from it and if yes, how structuring fees or permanent fees? Another question is the maturity of investment out of the NAV of IK investment partners, we don't have really the fee paying AUM. So just to clarify how old or young is the portfolio? And also maybe a word on management fees, [indiscernible] structure? Is it the famous [ 2-20% ] 2% of management fee, 20% of carried interest? Or is it a bit different. Maybe you could also elaborate a bit on the kind of ambition for the midterm that you have for IK in terms of fund raising fees and carried interest, let's say, above 2024 for which you have already given some guidance. That's it for me.

Okay. So well, the tax rate the tax rate of IK is relatively in line with the average European tax rate, so in the area of 25%, if I -- the only point I wanted to mention is that the way we structure the transaction is that we will make it in a large way, transparent to us, which means that we will we be paying the tax for our share of it and benefiting from our tax, how do you call that, deficit tax losses, which means that we may have at our level, when you look to the benefit, a lower tax rate than the average tax rate of the rest of IK. It's for us a way to -- it's a synergy, if you want by that, and that will lower the tax we will have on our share of the pretax earnings of IK. Well, yes, there is core investment, EUR 1.8 billion of co-investment into IK that generates potentially ability to be on transaction that they're a little bit larger than they would have done on their own size, which is a good way for them to create value. But also this generate the ability to have some fees linked to transaction fees and our capital market fees, which is -- so it's not a direct fee paying, but it generates some side revenues from that. The fee paying structure is effectively in line with the market practice. It depends through small cap and the mid cap. But on average, what you've mentioned, which is a classical [ 2-20 ] is really in line with what they are doing. The question that you had was what is our ambition. Well, it's really to grow this platform. And I think we can leverage it to grow it. But let's give us a little bit of time, and thanks to discuss when we will see you in the -- during the Investor Day. But yes, our ambition is really to grow the asset, grow this company, and we think we've got significant potential to do so. And it will be -- yes, I've said that [indiscernible] [ 2-20 ]. And do we have the -- yes, I think I answered most of the questions.

Yes. And regarding your question on the amount core investment and dry powder, the breakdown is on Page 10.

Your next question comes from the line of Arnaud Palliez from CIC Market Solutions.

Yes. And congratulations for this -- for development in asset management. I have several questions again on IK to have more details. I would like to know just what is the fund raising now for the [ vintage #10 ]. What is the target? And can you give us also some additional information about what are the other strategies and if on some of them, there are also some ongoing fundraising process? So about the first question, then regarding the carried interest, can you explain us why you're going to take just 20% and not 51% of the carried interest on the future fund? And the last one maybe just in terms of the synergies. So you mentioned the one on taxation. But are there also some other type of synergies? And are some of your investment professionals going to work at IK Partners? Are you going to exchange expertise, let's say, with IK partners?

Okay. So the fund being raised is -- or underfund raising is IK X as I mentioned. As it is commercial, say, I'm not in a situation where I can disclose where they are, but the target is to reach above EUR 3 billion, EUR 3.2 billion is the target that they have for the fund and which should be within next year. Yes, David? Second question.

Yes. Okay. So regarding your second question, I think we -- so we want a perfect alignment. So we thought it would be a good idea that we have a share of the carried so we have the same stream of income with the team. At the same time, it's very, very important that the team remains highly incentivized on delivering performance. And so the lion share needs to remain with the team. So we thought 12% was the right balance between alignment and incentivization of the team.

And it's really much in line. I mean you see different things within the market. But I think 20% was the right thing to do. Well, we want one, but we think it is so important that the team is really committed to the performance and I think the LPs are also thinking that it is a very important element. So the -- today, the team has 100%. Now they will move to 80% of the carrying interest. Now synergy, yes, obviously, there are synergies. I've talked about the technical one, which is a tax one. But as I mentioned, this transaction will mean that we'll work on our own cost and our own structure and to reduce our cash burn doing it. Some of the teams may be complementary to the organic growth that we may do at IK and there is for example, we have areas of expertise like ESG or [indiscernible], where we can create a common knowledge between us. We may have work to be done on fund management activities also. So all of that can generate significant elements that will reduce our global cash burn.

[ Jeff ], on IK X what is -- are you going to invest in this fund and can you give us an indication about the size of your own investment?

Yes, we will invest up to potentially EUR 300 million. And I say with a maximum of 10% of the funds. So let's say that the fund target is -- yes. But it will be -- we want to invest up to EUR 300 million on this one. And that is taken into account in the LTV of 10%.

Your next question comes from the line of Joren Van Aken from Degroof Petercam.

Just a quick question for me. Which brand will be put forward for the asset management business going forward? Will it be [indiscernible].

IK Partners.

Okay. And is that also then the case for the other strategies that you want to venture in like infra and private debt, for example? Will that also be a segment of IK or...

We'll always use the most powerful brand. So I cannot give -- I cannot give an immediate answer to that because it depends how we develop ourselves in infra debt. But what we want is to create a platform, it could be -- it's a little bit like if we had IK by Wendel. And tomorrow, it can be something else by Wendel. So -- but I want to have -- we think the IK brand is a great brand, very well recognized, very well seen. And I want to have clear clarity between our 2 activities. One is permanent capital that we'll keep on doing long-term investing on one side. On the other side, we've got an asset management business with strong teams with a good track record that will help growing. And they should rely on their brand. Long term, if we want to have a common -- with different vertical common -- how would you say that investor -- Investor Relations team that goes to LPs and so on. Yes, we will potentially have 1 that will be globally, and that will be within the Wendel name, but working for the different brands. In a way, it's a little bit like the sort of model we've been successfully developing [indiscernible] investment management business, which is a sort of a different approach where you still have great teams managing asset with their brand and ability to deliver long-term value, and then you put together whatever is not linked to the investment process in order to generate -- perform -- I mean, efficiency security or higher reach in terms of distribution. That's really what it is.

Okay, clear. And then second one, do you have like a vision or an idea of how much you want the asset management business to become of the total portfolio of Wendel? They have a waiting...

Yes. I suggest -- suggest we discussed that in the -- during the Investor Day, yes. But we want to be ambitious together with cautious. And we only want to do transactions that align the interest of the people. For us, it's very important.

Your next question comes from the line of David Cerdan from Kepler.

I would like just to check with you the due diligence. Can you explain how you can be sure of the fair value of the net asset NAV reported by the company? As you've been able to test the different investment of IK Partners.

Thank you, David. very important question. So we carefully looked at every past exits on the valuation of those exits compared to the previous NAV to make sure that the NAV in the books were conservative and we will reinsure on that front. We saw a lot of additional value being crystallized upon exit, meaning that the NAV in the books were lower than the valuation that they -- that were obtained during this process. And then on the current portfolio, we went line by line on every -- the 4 strategies that Laurent mentioned. Look at the current trading, look at the initial business plan, look at the multiples in the books and compare that to our own valuation for each company, and we got a high level of comfort that what we saw made a lot of sense and was very rational.

Okay. And second question is regarding the process. So have you contemplated some alternative to IK Partners? IK Partners was in discussion with some other guys or not. And do you -- for which reason have you decided to select IK Partners if you had some other choices?

Well, you always have -- as we mentioned, this is a period where there is consolidation going on in this industry. So there is a discussion of every asset manager is talking to everybody. So it makes sense. And since we've announced our own strategy 6 months ago. We had a lot of people that have come to us to talk to us, which makes sense. And we -- but from the discussion we had, really, we saw that the IK team because it is so complementary to us, because it's such a quality team with a large and unique pan-European organization was really the best one to do. And this is, as I mentioned, this is a people business. And to do a good transaction, you need to make sure that you arrive to learn and get along together well. And I think really what we've done with Chris Masek, but also with Dan Soudry and all the team and the extended discussion we had with the managing partners of IK has confirmed and comfort us in the fact that we were doing the right transaction. And last but not least, in this business, a good transaction is also a transaction where everybody has the same view of the future and is trying to align his interest together, and that's what we achieved to that, which is, I think, a great reflection of the fact that we're trying to build a common project with them. This is a real partnership. And that's why we're so confident of what we're doing with them.

Yes. I will just add that we also found that there was a very strong culture fit. People we met were very transparent high level of integrity and very pragmatic -- and we hope to behave the same way, and we thought it would be a great combination and very easy to work with those people.

Okay. Last question is regarding control and [indiscernible]. So you control 51% of the company, but you say that the IK Partners will remain autonomous independent. So is it -- is there a problem about that? So meaning that you control...

No, we control but what we don't want to do is to substitute ourselves to the team to generate the performance. What we're buying is the ability of a team to create long-term return. And they have great track record. You know that whenever LPs invested in these private equity companies, they invest in teams that have worked together for years and delivered a sustainable return. And that's what -- that's why we want a long-term partnership with them, and that's why we want to make sure that they are fully independent on it. And also, what we want to avoid is that there are any doubt by anybody that there could be conflict of interest between the investment we are doing on our own balance sheet and the investment done on the behalf of LPs that has to be very clear. There is no conflict of interest at all. There is total independent in the investment committee of IK, and that has -- if you don't do that, then it's -- there's always question and so on. So we're very, very sensitive to that. And we want to be successful. What we want is to have the control of the strategy, have the control of how do we move forward and grow the company, how -- everything which is around the budget, all those elements, but then the compliance, the risk and so on. But then on term of investment capabilities and decision on the investment for the LPs. It has to be the team that has been -- which is often by the way, key people within the relationship with the LPs. So we really want to make sure that there is clear separation between the 2. Clear independent on that. And what do we buy? We buy the ability of this team to deliver superior return, and that is based on the people that are here.

Okay. I have a last question. Regarding your estimate of EUR 60 million pretax rate for 2024. Can you explain on which assumption -- what are the assumptions? And how does it compare with 2022 or 2023?

Well, as a nonlisted company, I don't give the past figures of IK but their '22 was much in line -- and well, the revenue growth is reflecting the asset under management growth, obviously. But it has been on a reasonable assumption. I can -- as they are in the fundraising process, I cannot give you the assumption exactly that we've taken, but it's a reasonable assumption, I can tell.

Your next question comes from the line of Geoffroy Michalet from ODDO BHF.

Two additional questions for me. Coming back on Slide 10 and net asset value. You don't provide disclosure between what is fee paying AUM and what is, let's say, embedded performance but non-fee paying AUM. Could you maybe give us some indication on the fee-paying growth [indiscernible]. And the other question has to do with what you mentioned, conflict of interest. We understand the clear separation of investment committees at Wendel level and at IK level. But from what I understand, for instance, IK for instance, could have been buying Scalian because this is the kind of transaction in size and in sector that they do -- you did it. But how in the future, will you manage -- I think there is at some point a kind of overlap in the investment strategies even if they are not conflicted?

Well, let's say, I'm not going to review the exact number for the fee paying, but it's roughly around EUR 9 billion. So today if you take -- I think Scalian is a great example. I don't think IK would have gone onto Scalian. Scalian is a EUR 560 million investment from ourself, which is significantly above target of investment, which you can see, which is EUR 100 million to EUR 300 million equity for IK. So there is -- we've discussed that significantly with them. And I think there is no -- well, there is a very little overlap, and we will have -- we've created something in order to make sure that we manage the priority right between one and the other. In case of potential conflict, but -- which will be clear ahead but we don't expect to see. David, I think it's very complete -- to the contrary, we think what they are doing is very complementary to us.

Absolutely in terms of size, it's a different -- a very different playgrounds. I would also add that IK is not investing in the U.S. as well.

But in Europe also, very complementary in U.S. and very complementary in Europe. And this is one of the attraction also of IK into us.