Wendel (MF) Earnings Call Transcript & Summary

Yes. Good morning to all of you. Thank you for being there on short notice. I will make this presentation together with Cyril Marie, who is in charge the development of the asset management platform. Here with us, we also obviously have David Darmon, who is member of the Management Board. We are all very happy to present to you this important operation, the acquisition of Monroe Capital. It is a very transformational transaction, which is fully in line with the strategic roadmap that we present to you back in March '23. You remember, we've said that we will develop a dual model in which we will start to develop an asset management platform. We've made the acquisition of IK, which we announced a year ago. We're making, today, the acquisition of Monroe, which complement that and create a true asset management platform now with above EUR 31 billion of assets under management and EUR 160 million of FRE. But I will come back to the detail. So the acquisition of Monroe Capital is really a transformational step. IK was the first move, but now we create truly a third-party asset management platform. Monroe itself is a key player of the low and mid-market debt capital in the U.S., private debt capital in the U.S., which is a very wide market and very attractive market. It has been founded in 2004. It's headquartered in Chicago and been founded by Ted Koenig, who is still the Chairman and CEO of the company and will stay for the years to come. It is one of the most highly regarded company in that field in the U.S. It has a nationwide network to cover the U.S. mid-market from origination to credit. It has a very disciplined credit underwriting policy, and it's a former banker that [ talked ] to you. And I can tell you, we've looked at it, and it's first-class way to work. It has a large and very diverse global investor base, which is very important to us. And -- but we think we can help them still grow that basis in Europe. And we can use that base also to help us grow IK, [ then we'll use ] LPs tomorrow. We will -- as we did with IK, we will use our permanent capital as a tool to grow the company and to help it grow and we always think about how much do we want to commit in order to help the company to grow, and that depends on the size of the company. We will commit EUR 800 million of sponsor money to help grow the company, and they will be on long term, EUR 200 million money, EUR 200 million that will be reinvested through GP commitment, which is basically generally 0.7% of any funds. Those sponsor money is here to help the company to grow to develop, and we think it makes a lot of sense in order to create value, boost through the return on the investment. But also because by helping it grow, you create significant more value tomorrow. And we think it is part of the strength of our model. It is a transformational milestone to us because we are really creating a platform, as I mentioned. First, we were the shareholder of 1 asset manager with IK, first-class asset management in Europe. And I again, want to re-convey the fact that IK is absolutely a great team with great performance that -- fundraising is going very well at IK. They have -- they are in a phase of globally raising EUR 6 billion throughout the different strategies, and this is going very well. And that's going very well, thanks to the quality of the team and their performance. But here, we're now adding a second leg, which is the Monroe one. Credit is a very, very deep market, private credit and specifically in the U.S., but -- and we'll come back to that. And we think that to have a U.S. firm in that area is a key advantage. It exposes us more to the U.S. economy, which we think, long term, is a great thing because it has demonstrated that it's more dynamic than Europe. But also, it's part of the U.S. market, which is the most dynamic one and more innovative one, and we can use that to develop in Europe afterwards. The transformation of the model to become also a dual model, to become an asset manager is one that will make us to be a more cash-generative and predictable business model. That will allow us to continue increasing our dividend policy in the future so that the return to the shareholder is high. The platform will be, as I mentioned, EUR 31 billion of AUM, EUR 160 million of FRE now. The initial transaction is EUR 1.130 billion for 75% of creation of Monroe shares and 20% of the carried interest, future and past. Total consideration could be increased by an earnout, which will depend on the growth of the FRE and -- which will then make that -- the value of the total, the price paid will range from 14.7x to 15x the 2025 FRE. And obviously, if we pay 18.5x to '25 FRE because the FRE has grown by more than 26% of compounded annual growth during the period, which means that if you will look to -- then the price paid compared to the FRE in 2027, it will be a low multiple then, which will be a good news. We're also paying 4.2x for the pretax TRE, which is not a high price. Strong value creation through that. I mentioned return on sponsor money, stronger predictable cash flow, performance-related earnings that will flow from next year in our earnings. And with this acquisition, we are and we're confident that we can, without any new acquisition, reach the EUR 150 million FRE target Wendel shares that we've put as a target for 2027 by only basing ourselves on the internal growth potential of Monroe and IK. Now I will leave the floor to -- for the -- after that introduction to Cyril Marie. Cyril has joined Wendel a little bit more than a year ago. He's very experienced in the asset management industry and Cyril is in charge of developing the asset management platforms, and he will go through -- he will take you through Monroe. Cyril?

Thank you, Laurent. So Page 3, so Monroe, as Laurent said, EUR 20 billion of assets. It's a leader in the U.S. middle market private credit. So they have the critical size. And at the same time, they are very focused on what they do in the private credit. So the target firms between EUR 5 million and EUR 40 million of EBITDA. They have a very long track account because they have been created in 2004. They have a very large team because credit is based on process and teams. So as you can see, 270 people, 110 investment professionals. We'll see later on that they have a very broad origination team. That's clearly an edge for them. They have a lot of diversification area because they have the critical size. And as Laurent said, as you can see on the map, they have really a footprint everywhere in the U.S. They do only U.S. private credit, but we believe that the quality of this team will allow us to create a more global private credit platform. If we move to the next page, Page 4, first characteristic of Monroe is the growth. They have delivered strong performance for their clients and also they deliver strong performance for their shareholders. As you can see, one important figures, plus 20% of CAGR over the last 10 years with 2 main effects. The first one is that their market is fast growing. As Laurent said, the private credit is a fast-growing market. It's developing and there is new areas of growth in this market. And in this market, Monroe's positioning is very strong. They have been in a position to create a new engine of growth and diversify their book of business, and it has led to a very strong growth over a very long period of time. Following page, Page 5. After growth, the second characteristic of Monroe's diversification. Even if they are very focused on what they do to deliver strong performance, they have been in a position to develop a very well diversified book of business. Diversification by client type. As you can see, the pie charts in the middle, insurance companies public pensions, family offices, retail. We talk a lot about the development of the retail in the private asset. They are very well positioned to also [ take care of this ]market, and they have a lot of experience in the field. Second element of diversification, by geography. For sure, they are a U.S. firm that started from Chicago, but they are now diversifying their book of business. They have more and more international clients, and we believe that there is strong potential of growth for us outside of the U.S. with the combination with IK and Wendel, we'll discuss it later on. And the last element of diversification, the third pie chart is that the way they deliver their products. So U.S. private credit middle market. They have developed a full range of products, so you can have it through close-end funds. But also, when you have big clients with SMAs, it's very important for insurance companies, through CLOs and also, they are also what we call the BDCs. It's a retail vehicle for U.S. clients. So as you can see, very focused on what they do, but very well diversified in terms of book of businesses in order to have various engine of growth. I think it's very important. And I may have just one thing, they have more than 150 clients, global institutional LPs, and they have a very strong distribution team with 37 persons. Then so diversification, maybe we can then go to Page 7, and this is backed by a very strong team. I can tell you we spend a lot of time to understand the quality of the team. So here you are, on this page, the senior management, the founder, Ted Koenig and the rest of the team. But behind this, you have a very deep team with various layers of management. Credit, as we said, is based on process. So they have 22 equity partners, and we will see when Laurent will present the transaction, they will stay in -- exposed to the equity. And behind them, you have 70 managing directors. And in each specific function of the organization, you have a very deep team with a lot of experience. The rotation is low. The culture of the firm is very strong, and you have this -- you can feel the entrepreneurial dynamic at each level of the organization, and it's very important to us. Following page, Page 8, maybe a bit more detail quickly on what they do, just to give you a flavor of the -- really, the expertise of Monroe. Two things: The first one is why the middle market, why we consider that the middle market is a very interesting sweet spot for us. The first thing is that it's consistent with what we did with IK because IK focus is also the middle market. So it's a common run for our affiliates, let's say. So why the middle market? First, you have higher spread. It's less competitive. And in fact, you have a barrier to entry because if you don't have an origination team to really be in connection with the local economy and finance the local economy, you cannot have access to those deals. So I think -- we think it's very interesting. The second thing, it's a smaller deal, more diversification in the fund. We believe it's very interesting for the exposure to the U.S. economy. You get also better terms, whether it's covenants and also you have less leverage. And one also very important thing, even if they don't do equity, they do direct lending. I can tell you they are very active. In 80% -- for 80% of their transactions, they are what they call agent-ed, meaning that they are the leader in the connection in the financing of the transaction. So they can impose their terms, they can impose their covenant. And then after the origination of the loan, the way they monitor and the way they act to monitor the transaction, they are very involved in this like an equity manager. So I think it's a key characteristic of Monroe. And then in the -- not the pie chart, but in the other part of the slide, you can see the key characteristics. So focus on the middle market. Local national platform to have origination. So the original transaction that the others don't have. And I think it's a key element to deliver performance. The origination team is totally different from the underlying team. It means that they have this local presence. But on the other side, the investment decision is based -- is centralized with a very strong experience in terms of investments. And the way they manage the portfolio also is very interesting and they have this -- what they call this "credit first and zero loss" experience. And it's done, as I said, by more than 100 people at the level of the organization. If -- now to give you a bit more detail on why the U.S. and why we consider that Monroe is the right platform to develop Wendel asset management platform in the private credit. So the U.S. credit market, very broad, fast-growing and also very mature, it means that the dynamic of the private credit is well advanced in the U.S., whatever the client type, the vehicle, the regulation. So it's mature, but in the sense that it's very well organized between the investor, the asset management companies -- and it's -- at the same time, it's fast growing. The potential is still there, the dynamic of the U.S. economies. And when we talk about the middle market, it's EUR 10 trillion of GDP, it's more than 200,000 businesses. So it's very well diversified. And you can see also on this slide, the quality of the middle market versus the large cap. For sure, we know that the middle market -- the businesses have a different characteristic, but you can see the quality of the spread and also the fact that we can get better terms in this type of market. Following page. So why Monroe is the right partner for Wendel to enter in the debt segment? So first, as I said, the U.S. market, very interesting, very broad, very mature. So based on Monroe, based on the biggest market in the private credit, we can build a global private credit platform. And we believe that the management has the mindset to do so. Then they are very focused on what they do with very strong entrepreneurial dynamics. They have the critical size. They have already the experience to work with institutional clients and retail clients. They have a differentiated approach to private credit. As Laurent said, we like the fact that you have a strong origination on one side and the underwriting team on the other side. The fact that they act as agents, so they mean that they are very active in the way they manage the credit. We think it's very important. And the last element is that it's supported this by a very strong team, 270 people. And the way they have built the firm, they are ready to go through the management transition. They have strong ambition. As I said, 23 equity partners and a very broad team. And on top of that, it's very important for all of us. They have delivered very strong performance for their clients, for sure, because they have delivered a 10% IRR on the unlevered basis over the long term. So over the last 15 years, during the period where the -- we were in a low rate environment, they have delivered superior performance with relatively low default rate and with a very strong recovery rate. I will finish with what do we bring. So Monroe is fast growing. We believe that with this transaction, we can accelerate the growth as we are doing for IK. And for this, we have 4 levers: The first one is we provide capital. It's key to develop the business. We don't provide capital just to enlarge the AUM. We provide capital to grow the business with new initiatives, with new products in order to create value for the firm as a shareholder. And this, as you can see, it's a very significant commitment, EUR 800 million for the sponsoring and EUR 200 million to finance the GP commitment. That's our first contribution to Monroe. The second one is also very important. Each new affiliate will benefit from Wendel network to develop partnership and the capital formation is a key element to the development of private assets. And we consider that when you join Wendel, you will have access to a strategic partnership. And today, we can announce that we have engaged discussion with AXA. We'll come to this. And I think AXA is already a very significant LP of Monroe and we will sign a strategic partnership with them. The third element is very important. When we look at each new affiliate, we check the compatibility and the complementarity of LP base. And here, we have a very concrete example. If we look at IK client base, and Monroe client base, there is a lot of complementarity, and we believe that there is a strong cross-selling potential. As we know, it's always more easy to sell a product to an existing client. So we'll work on it to really reinforce the cross-selling between the 2 platforms. And the last one, that's the long-term ambition of the Wendel Asset Management platform is to reinforce the -- and to be additive to their existing fundraising capabilities by creating a centralized fundraising platform in new markets for them, and we can take the example of the Middle East and APAC, where, for sure, we can accelerate the development of Monroe. Laurent?

Thank you, Cyril, for that highlight on Monroe. Maybe a little bit of a focus on the partnership also with AXA. AXA IM Prime, through its GP Stakes Fund, has entered with us into active discussion to invest alongside us in the capital. So we're buying 75%, but we may sell -- well, we probably will sell a small proportion of that, up to 3% to AXA IM Capital so that they are investors alongside us and they are partners to us in order to invest into the company. As you know, AXA is one of the largest private credit insurer -- investor. It needs to invest the money of its insurance client in long-term asset or yielding assets like private credit. They are very sophisticated to that. They are a long-standing investor within Monroe. They know the quality of Monroe we've discussed significantly with them to make sure that we made the right assessment of the team. And I can tell you, we're given a lot of comfort from their long-term relationship with them through that. So this is a very important element because it confirms our approach and that will help us doing further strategic initiatives on that side. So yes, this is the partnership with AXA. Now the transaction itself, what is important is like the IK transaction, it is a transaction that is structured in a way that we have alignment of interest between the different parties. It is a transaction where we will leave to Monroe it's autonomy to manage the business, to keep the control of the investment committee so that the trust that the LPs has put in the team is untouched, and we can still continue raising fund. This is also a long-term vision, so that people are here to stay. We have put -- well, we've got the earnout. We've got put-call mechanism that makes that they are -- people have long-term ties to the economic delivery of the company and there's no levers. There's incentivization for the new generation of partners and there is, on every element, identified succession plan. Obviously, we will chair the Monroe Board. We will do our oversight. We will manage, together with the team, this strategy. like we did for and we're doing for IK. By the way, there is no conflict of interest also which is very important. That's an element between different firms. Monroe product and IK products are not competing at all, and they are not competing along either with Wendel's direct investment platform. Element of interest today is also very important to us. So I talked about the earnout, we talked about the 25% put in call, which is an element that will align the interest of the full management with us, where alignment of interest between us, Wendel, and the LPs through the commitment we are putting in the fund. So we will be committing in there as a GP commitment in all fund raise up to EUR 200 million. It will take some time because if you -- a GP commitment is roughly 0.7% of the funds. So to deploy EUR 200 million will take -- mean that they have raised above EUR 20 billion of capital, but we also put EUR 800 million of sponsor money, which is very different, which is helping growing the company by setting new initiatives, where then you can leverage to get new clients in those initiatives, and we think it makes sense. We always calibrate the sponsor money to the size of the company so that we can relate how much sponsor money we are putting for itself, so the return we have on the sponsor money, but also for the value we can create for the firm by creating roads to it. And we have our shared -- like all other -- like the other partners of the carried interest and which is an element of interest with the teams and with the LPs, we have 20% of the attributable of the carried interest for past and future company. It's not different from IK. IK within the past, carried interest. Here, the carried interest, the past carried interest is within the GP. So we're buying 20%. We're paying the full of it. Maybe this transaction have already -- which is Page 14, I've already got into much of what is here. The EUR 1.130 billion initial consideration, which is really buying the 75% and the 20% that you're going to see and future carried interest, earnout of EUR 255 million, which will be paid in cash in '28, depending on the compounded annual growth of the FRE during the period. The EUR 255 million is an objective that is rich if the CAGR is above 26% at that time, which means a significant growth during the period. The remaining 25% will be acquired over 8 years with a pretax FRE multiple, which is directly depending on the realized growth of FRE. The transaction will be financed by cash on our balance sheet. We had ample number of cash. The LTV pro forma 30th of June. This transaction is around 19%. Closing is expected to occur in the first half. We expect as soon as first quarter, but let's say, first half to be safe. Page 15 gives you the same description of this mechanism. The total consideration for the 75%, including the earnout will be between 14.7x pretax FRE to 18.5x pretax FRE. If we pay 18.5x pretax FRE is because the growth of the FRE in the period has been very important. And the resulting -- should we pay that, that will mean that the resulting price we paid at that time will be something like 11x the 2027 FRE multiple, so -- which is a good -- it means that we've been successful with the transactions, obviously. Now what does it mean? It really means that we are becoming a platform asset management. Here, we've put Page 17 back, the page we've presented to you. I think first time was 1.5 years ago. We're moving along this. We're really creating a sizable and comprehensive third-party private asset management through both external and now probably more organic growth and generating significant value through what we want, generating regular cash flow through the management fees and capital appreciation through the carried interest, sponsor money return and obviously the valuation of the DP itself. I don't come back on the benefit from the platform. I think Cyril mentioned. But obviously, now that we've got IK and Monroe, we will start to develop the part on the strategic client, cross-selling creating the global distribution platform. In terms of cost saving here, there will be little because there's no overlap. But obviously, if we want to develop and we do want to do so, the Monroe platform in Europe, we will be able to use the infrastructure that we already have in terms of IFM, so on in order to be faster getting onto the market. I don't go back on our -- the unique benefit from our platform, but I can tell you that it does resonate with the best team that we see. And that's why we only have premium assets on that. We just -- we cannot -- we will not have in different vertical, different team. So we just want to make sure that we always have premium teams for each of the verticals. As a result of that, the platform will manage -- this is a little bit more than EUR 31 billion. By the way, we were 0 a year ago. We have 2 fast-growing verticals, private equity and private debt. It's both top-tier managers of private assets, IK and Monroe and with global exposure in Europe and the U.S. The amount of -- this platform will generate, and I'll come back on next slide, EUR 455 million of revenues and EUR 160 million of fee-related earnings. I'm underlining the EUR 160 million of FRE, because if you compare to the different platforms throughout Europe, this is a very sizable platform now. Our share of that, because we don't have 100% of both companies today, is EUR 101 million. And we are confident that this share will reach the EUR 150 million target that we had put to ourselves in 2027 based on the growth of Monroe and IK. We have invested EUR 1.4 billion to acquire those 2 companies and start to prepare and create the platform, but that will create strong cash yield to shareholders, and you will see more predictable cash flows coming in due time. This platformization will help us accelerating the growth and will help us increasing our profitability over time. Next slide, you see the full P&L of the platform, EUR 430 million of management fees, EUR 25 million -- this is a pro forma EUR 25 million, full year. 430 million management fees, which is roughly 140 basis points to the assets, carries interest of EUR 25 million, which means total revenue of EUR 455 million, pretax profit globally of EUR 184 million, out of which EUR 160 million is FRE, which means an FRE margin close to a little bit above EUR 105 million. The net profit including the tax benefits of the structures and by doing the transaction in the U.S., we will be able to make a goodwill amortization there, which will lower our tax rate to 15% of what we bought. So the net profit that we will extract from, the platform, Wendel share will be EUR 105 million next year, expected. Wendel now, on Page 20, manage close to EUR 40 billion of assets, EUR 7.4 billion on the principal investment, and you've seen that we've closed, recently, the acquisition of Globeducate, which is a very high premium quality asset that we've bought. We are 50% together with Providence on this one and a third-party asset management platform, which has EUR 31 billion of AUM, 41% coming from IK partner in the private equity space, 59% coming from Monroe. This is a platform of 480 people in 10 countries, just to underline that it is now becoming a good platform. A key takeaway from that is, well, we're moving on. We're moving on the strategies that we announced. We have 2 pillars: Principal investment, where we're allocating capital allocation towards growth business. We have been able to distribute cash through this business, either through dividends, dividend we get or sell. And we're considering that the investment in principal -- principal investment is a source of a strong IRR return. Our target is above 15% on average, which helped NAV growth and have dividend on the other side. But it also generate permanent capital that we can invest in the development of the asset management platform and the asset management platform is only Tier 1 asset managers, strong gross prospect with double-digit growing potential, strong predictable cash flow, and it's a source of future capital gain on the sponsor money, but also the GP, interesting value growth. But it's also a source of cash flow, as I mentioned, which means that implicitly, we will be able to have more ability to pay higher dividend, which is really the return to shareholders. As you say, we've committed to a pretty strict distribution policy. We've already increased the dividend by 20% this year, and we will further continue doing so in the coming years, taking into account the fact that we will distribute the vast majority of the return generated by the asset management to our shareholders. So well, I think it's really a tipping point for Wendel. We are really becoming a true sizable private asset manager. We are enlarging our exposure to the U.S. economy, which, I think, is important, but it's also not a new territory to us. It is well known to us. We know this market well as we've been active in the U.S. for many years. We have a team there, which is a seasoned team. We made over EUR 2 billion of investment in the past. And as individuals, we have significant experience with the asset management business in the U.S., thanks to our past experience. We are doing active work on our principal investment portfolio to create capital appreciation with permanent capital, and we will work on the rotation of our portfolio in the coming months. And our #1 priority today is build the platform and asset rotation. You have an Investor Day in 2 or 3 days -- no, in Friday -- not an Investor Day. You've got the -- you will have the third quarter earnings on Friday and the Investor Day, where we will give you more detail on December 6 in Paris. Here we are for this short presentation, and we are at your disposal to answer any questions you may have. Thank you.

[Operator Instructions] We will now take our first question. First question is from the line of Joren Van Aken from Degroof Petercam.

Just at the back of the press release. So you mentioned EUR 31 billion of AUM, EUR 430 million of management fees, so about 140 bps in the fee rate. But keeping in mind that private credit is about 60% of the AUM. I would -- my estimate would be that IK Partners fee rate is close to 200 bps and then Monroe is close to 100 bps. Do these calculations make sense? Or am I missing something here?

Obviously, the -- I cannot give you the details exactly, but the private equity is more on 220 basis and the private debt is more on a 120 basis, [ 20 ] being all way the carrying interest.

Yes, indeed. Okay. That makes sense. And then a second question, if I may. It's on the AXA stake. So you will sell part of your 75% to them, up to 3%. But I suppose that their fund would need to generate liquidity at some point as well. So is there, like, a time line that you have for their divestment? Is there like a lockup period that they have? And if they decide to sell, do you guys as Wendel, do you have, like, a first choice on the stake of AXA. Any details there?

Yes, this is a private transaction. But yes, it is a long term, at least 5 to 7 years investment; Monroe, 7 years, by the way. And yes, we have a first -- we will have sort of priority ability to buy these things, but it's a long term being there. Yes.

We'll now take our next question. This is from the line of Grégoire Hermann from Berenberg.

Just a few, please. Just maybe on the centralized fundraising platform that you mentioned and, I think, especially focused on MENA and APAC. Could you please be a bit more specific here on what you intend to do? Is this basically, like, somehow kind of lack that you've identified at IK Partners and Monroe and then basically, you would like to build a better fundraising platform in this region? If you could be a bit more specific here on how that fits basically with your 2 alternative asset managers, that would be helpful, please?

Well, to -- oh, sorry. Yes, please. Please go ahead.

The second question would be on the integration now of Monroe. So now that you have a second acquisition and that you have a start of a platform. In the past, you mentioned that you would be inclined to do some works on the back office structure, potentially the holdings in Luxembourg and so on. Would you wait to have the 2 acquisitions somehow synergized on the back-end platform before working on the third acquisition or before actually acquiring a third asset managers? Yes, pretty much. That's the question. And then can you give us insight about the FRE growth of Monroe over the past 3 to 5 years, please?

Okay. Let me start. The fundraising capacity, we've mentioned specifically MENA and Asia because to be able to fund a fundraising platform, you need size. You need size and you need diversity. And we think that the fact that we can now bring to investors in this area, Japan, Korea, well, Asia globally, but Taiwan, which are -- China even, which are big areas of -- parts of capital, Australia for a part also, you need to be able to speak to those investors on a regular basis with different types of products. So we think that now we have the 2, we can entertain to have good quality people on the ground to be doing so. Same for MENA. MENA, you see most of the investors in MENA make significant investment. They don't like to make small tickets. So you need to come with a broader range of product and broader -- so yes, we will develop. I'm not saying it is a weakness, because you've seen that Monroe has one office in Korea, South Korea. They have one office in Abu Dhabi. But we think we can reinforce that and have the ability because we have now the 2 of them to entertain a high-quality platform with good people. So we will work on that. We will also develop and look and work in developing that also for some European clients, key clients, so we're thinking about it. So the objective is to have people dedicated to the global platform that will be entertaining the large client and making sure that we can develop more our asset under management. So about the integration, Monroe being a U.S. company, there will be no benefit on the backbone thing yet. Obviously, I'm not going to migrate Monroe on Luxembourg IFM. So they have their own U.S. type of fund and their dedicated regulation. However, as I mentioned, one of our goals is to help Monroe to develop a European business. Doing so, yes, we will use the actual existing support of what we have in order to develop that because it will make a lot of sense. So that will be a sort of way not to spend new money, but to use the existing infrastructure in order to do so. The third question was about -- I didn't talk...

The FRE growth over the last...

FRE, Cyril? I think it's in line with...

Yes, it's in line [ with ] the revenues. You have a slight margin effect, so the more they grow, the more they improve their pretax margin, but it's so slightly above the revenue growth and the AUM growth that you have in the Page 4.

We'll now take our next question. This is from Alexandre Gerard from CIC Market Solutions.

Yes. First of all, congratulations for that transaction. Four quick questions on my side. First question, how did you source that deal? Was it a competitive process? Or did you have any particular relationships with any of the partners at Monroe? Second question, can you elaborate a bit on the $200 million of GP commitment? What is it exactly? I mean is it some kind of capital increase in the future to try to -- for the EDP to develop itself? Third question, can you give us maybe an idea of the trend of the evolution of the management fee rate at Monroe since the inception of the company in 2004? And the last question is regarding the financial flexibility at Wendel. So you mentioned an LTV of 19%. Is it the maximum for you? And what are you going to do in terms of development, in terms of filling the gaps in your platform? Are you going to mark a pose? Or will you still look for new initiatives in terms of M&A in the far world, et cetera?

I will start from the latter. So the last one, 19% is not a level we want to increase. So we will take -- we will -- and the fact that we made Monroe our -- our priority, as I tell you, is to integrate and to create the platform. So we will really spend our time on that. And we will, throughout time, create additional financial capacity through asset rotation. And then we will envisage either making new acquisitions in principal investment or making additional acquisition on our platform. But our priority today is not this one. Our priority is really to create the platform and work on our assets to increase our asset rotation. I will -- how did we source the transaction? Well, we've known Monroe for many years because it's -- whoever know well the private asset market in the U.S. know Monroe. And as we've been active in this market for years, we knew them. However, we've met them on a one-to-one basis months ago. We've entered into discussion. However, in this field, in this world, every discussion and discussion can be is -- you cannot believe you're alone. I think Monroe is a great asset, and they had, potentially, other opportunities and other possibilities. We do believe that our value proposition is a key differentiating factor. And I think that's why Monroe took and decided to go with us because we have a different model. And I think Cyril went through what do we bring to them, and I think they really fully recognize that. So Cyril, do you want to add something to this? I think it's pretty clear. Then there were 2 questions. The GP commitment. GP commitment is basically -- we're not -- it's not a commitment on the GP. It's what the GP commits on -- together with the teams on a daily -- on each fund. On each fund, you commit something like 0.7% of the fund to align interest between the GP and the fund. And that's what we are talking about the GP commitment. So to deploy the EUR 200 million means that you will have to raise over EUR 20 billion of assets before we invest those, so it will take some time to be deployed. But it's important that there's -- the GP commit some minimum amount of money. It depends on fund by fund discussion, discussion with LPs, but it's that. Then in the management fee. Yes, Cyril?

I think the -- what is key for sure, there is always the competition in fees. But as I mentioned, the fact that they have the specific focus, they have created barrier to entry, because it's very difficult to have access to those loans, so it means that LPs are ready to pay fees, and they can maintain their fees. And when we look at in the past, the evolution of their fees, they have maintained their fees at a good level, and it's because they have this focus and this access to specific deals that allows them to maintain their fees. That being said, you have also the benefit of the fact that they have a retail client. And the retail clients, as you know, the retail business, the fees are higher. And on top of that, the capital are permanent because it's ever green vehicles.

No further questions on the phone lines at the moment. So I will now hand back to you to answer any questions via the webcast. Thank you.

We have a question from Mourad Lahmidi. "Could you provide the actual dollar amount of management fees, performance fees and fee-related earnings for Monroe on a stand-alone basis, please?"

We've disclosed in the communique and in the presentation, all what we can to disclose. All number of Monroe will be integrated from the day they were -- will be part of us within our asset management disclosure. You have the numbers of Monroe fully integrated in the pro forma numbers that we've given, page whatever it is, I forget the name of the page, 19. That includes all numbers of Monroe, expected numbers of 2025.

From Mourad again, "Could you split the EUR 1.1 billion paid between FRE and TRE, not in multiple, but in value?

Well, I gave you the multiples because, as I say, for reasons, which is linked to the fact that it is a private company today, I cannot give you the detail of that, but you've got the multiples and I'll let you make your own assumption to that.

How will you deploy the $800 million of sponsor money on private debt or other strategy such as infra?

Well, I will pass, but globally, it will be new initiatives launched by -- not -- I guess, one, new initiative launched by Monroe. Obviously, their business is private debt, but they can do new initiatives. I pass the floor to -- and that will be -- by the way, we will deploy that over time because it's new initiatives. So it's each time we launch a new product and so on.

As Laurent said, sponsoring, the objective is to create new product to get fees. So it will stay in private credit first. And so loan to SMEs in the U.S., but they need to create new type of vehicles for the same strategy in order to reach new clients as that's the first way to grow the business. And the second development is [ fund ] to go to new assets potentially, but probably not infrastructure, but new verticals on the private credit in order to diversify the book of business.

Or developing the European business, which is one of the ways, geographical diversification and private credit, too. So this is a long-term commitment. It will deploy itself within time and with new product and business strategies.

Questions from Geoffroy Michalet, "On the LTV, the circa 19% person is not including the EUR 800 million of sponsor money, isn't it? If it's not, then the LTV would be at circa 24%, above 20% threshold. Can you explain on that?"

The commitment is a long-term one, so it's not immediate. But it will be deployed throughout time. And the way it is done, that we anticipate what will be committed. And once it commits, by the way, the full amount of money is taken in the LTV, even if it's not called. So here, it's global commitment. Each time it becomes a true commitment, it goes directly into the -- it is, not only the called money, but it's a full commitment money that goes into it. We anticipate here in our calculation, some direct commitment into it. But then it will come, over time, through -- when it proceeds. So again, it's new products that would be developed. It will fuel through the transaction and it will be part of the general cash management and balance sheet management that we have at Wendel. So I'm -- it's pretty easy. And so now maybe you can go on the philosophy of what we do when we do sponsor money. It's really to adapt our sponsor money to the size of the company we are investing in, in order to make sure that each time we put sponsor money, that creates significant value through the sponsor money, but also through the creation of value at the GP level.

Yes, we -- the way we size, we frame the sponsor money is really to create value for the shareholders, so far us as a shareholder of the GP. So each decision of sponsor money will be based, not only on the individual performance of the investment, but mainly on the value creation as a shareholder, and we'll do it product by product over time because, as we know, to create a product, launch a product, it takes time. You cannot do it in 6 months. It takes a lot of time. So you have to see this as a long-term commitment.

But we will, though, manage this thing like we've done in IK, by the way, throughout time. And we know how to also -- and we're also thinking about ways to fund separately part of that, which is not yet something we were doing in the past, but it's something we're thinking about, but it's not yet applied.