Against a backdrop of rising interest rates, companies need to strengthen their balance sheets, while remaining ready to finance acquisitions as opportunities multiply. Not forgetting the development of human skills, in which investment companies can play a key role. By Fanny Letier and François Rivolier, co-founders of Geneo Capital Entrepreneur.

In a particularly challenging environment for companies (post-COVID, war in Ukraine, rising interest rates, energy and raw materials costs) and the resulting issues of competitiveness and financing, companies need to address four key issues:

• Active management of their liabilities and assets, and in particular the anticipation of investment financing and diversification of funding sources, to optimize costs while maintaining a solid balance sheet structure;
• Continued acquisitions, particularly in Europe, where the need to secure supplies and decarbonize the economy are accelerating the relocation of production chains. Tomorrow's champions are taking shape today, and boldness remains the key to growth for mid-sized companies.
• The transition of business models towards greater sustainability, to meet regulatory requirements and mitigate risks, but also to reorient product and service offerings towards the markets of tomorrow;
• Innovation and digitalization, to boost competitiveness and support the transition to a more sustainable economy.

All these factors will require companies to strengthen their balance sheet positions, and in particular to raise long-term capital, such as that provided by evergreen investment companies. Investment companies should therefore see sustained reinvestment activity in their portfolios, but also increase their share of "primary" operations in ambitious companies that wish to continue to move forward, counter-cyclically, with a solid management team and strong banking partnerships.

For institutional investors and family offices too, now is an important time. While it is understandable that asset managers are arbitraging on their bond holdings in light of rising interest rates, private equity remains the best-performing asset class over the long term, provided that you smooth out cyclical effects by investing on a regular, annual basis, or opt for open-ended funds with no time limit.

That's what Geneo Capital Entrepreneur has been all about since its creation nearly five years ago. To support the best French companies in the territories, we have set up three investment vehicles managing a total of over 600 million euros, divided between Geneo Capital (an evergreen investment company dedicated to growth SMEs and ETi), a Relance Bond fund co-managed with Turenne Capital, and a GENEO Mezzanine fund (a quasi-equity fund dedicated to ETi committed to impact). In this way, we cover all stages of a company's balance sheet financing, enabling optimal management.

But financing alone will not suffice. In a context of tense human resources management, marked by a shortage of available talent, companies need more than ever to rely on solid human skills, both internally and externally.

Geneo Capital Entrepreneur is unique in that it offers its investors an integrated operational support program ("le Carnet de croissance"), a human resources platform dedicated to the companies invested in, concrete support for CSR and impact strategies (the "positive impact plan") and a unique Business Community. The aim is to offer SME and ETI managers not only capital to help them grow, but also teams capable of advising them and helping them bring certain projects to fruition, when they do not have the necessary resources among their staff.

This is also the reason behind the launch of a human impact index, in partnership with Humanis, which will apply to all our holdings and is based on strong convictions: financial and human performance go hand in hand. This simple, multi-sector tool will provide companies with an overview of their social and human impact, and suggest possible areas for improvement. Results will be measured and analyzed once a year.

We are convinced that, more than ever, the private equity of tomorrow will be one that combines financial and human resources over the long term.