SG Equipment Finance USA

by Stuart P. Papavassiliou June 2009

Pascal Bouillon, CEO of SG Equipment Finance USA, finds himself on his third U.S. assignment — this time at the helm of the business he was instrumental in creating in 2006. Just having completed its first full year of U.S. operation, Bouillon shares the French banking giant’s rationale for entering the U.S. leasing market.

Pascal Bouillion CEO, SG Equipment Finance USA

In 1864, some 135 years ago, a group of French industrialists and financiers banded to form a new bank. Their aim was to support the development of industry and commerce in France and they gave it the name Société Générale pour favoriser le développement du commerce et de l’industrie en France, which translates as The General Society to Support the Development of Commerce and Industry in France. As time went on, the bank shortened its name to Société Générale, while at the same time, broadening its borders to literally every corner of the globe.

Fast forward to the end of 2006 when the banking giant, and more specifically, its equipment finance franchise, SG Equipment Finance, made the decision to launch operations in the U.S. At the center of the planning were Jean-Marc Mignerey, who leads the business line, and his deputy head of the equipment finance business line, Pascal Bouillon. In the formulation stage, SG Equipment Finance’s leadership had identified veteran banker Philippe Mathé to serve as CEO of SG Equipment Finance, USA; and in time, named Juergen Jonczyk as head of risks and operations and Larry Scherzer to head up the sales and marketing effort. And with things going according to plan, the company formally announced its entry into U.S. equipment finance market in late October of 2007.

The Jersey City, NJ-based venture suffered a big blow last August when Mathe passed away unexpectedly. To deal with the setback, SG Equipment Finance looked to its deputy head to fill Mathe’s shoes. “As you might expect, Philippe’s death was a tragedy for the people here,” Bouillon recalls. “And it made perfect sense for me to be in charge of the U.S. for a couple of reasons. I was very familiar with the U.S., and I was very much involved in SG Equipment Finance’s entry into the U.S. market. In addition, for the business line to send its global deputy showed the bank’s commitment to the U.S. market”

Two Continents, Two Coasts
Bouillon himself is a veteran Société Générale banker having joined the company nearly 20 years ago. Schooled as an engineer, Bouillon worked for the French government for five years and joined the bank in 1991. Leading SG Equipment Finance USA is his third assignment in the U.S.

Bouillon explains, “I started working in one of the largest corporate branches in France and I moved to New York in the investment banking division practicing mergers and acquisitions. After five years, I moved back to Paris as the head of strategy of the global corporate and investment banking division. Once again, I came back to the U.S. when I moved to San Francisco and I started a corporate venture group for the bank. And then in 2004, I returned to Paris as global deputy for SG Equipment Finance to work with Jean-Marc Mignerey. This was a great opportunity because Jean-Marc is very highly respected as one of the best equipment finance professionals in Europe (he was named Leasing Personality of the Year 2007 by Leasing Life). The rest you know…”

But Bouillon can’t help but adding, “I think you understand, my family and I very much like living in the United States. Half of my professional life has been spent here and from a business standpoint, it’s a very competitive market and that, of course, can be very rewarding both professionally and personally.”

Key Relationships Factor Importantly in U.S. Launch
With an engineer’s penchant for understanding structural design as well as the details that make a well-executed plan work efficiently, Bouillon deftly explains SG Equipment Finance’s decision to enter the U.S. market. He notes that SG Equipment Finance was started more than 20 years ago and operated as a Franco-French business until 1997, when it began to expand into international markets. “We began to expand very slowly and very carefully. The major leap forward for us was in 2001 when we bought off the European subsidiaries of Deutsche Bank Financial Services. With that, we became the number one equipment finance group in Europe literally overnight.”

A second acquisition followed in 2004 at the time Bouillon joined SG Equipment Finance. This time the group acquired significant equipment leasing operations from Scandinavian lessors. Bouillon notes that both acquisitions were seamless and the strategy became to launch activities in growth promising countries. “That’s how we began operations in China, in Ukraine and of course, that’s how we came to the U.S. More recently, we’ve started activity in Brazil as well.

“But you might wonder, what has been our strategy and our philosophy?” he adds. “We said, ‘OK, the U.S. is the largest market in the world and we have been successful in being disciplined in terms of credit.’ For us to be successful here in the U.S, we have to replicate what we have accomplished in Europe where we have held the top position in equipment and vendor finance since 2002. In fact, just last year, SG Equipment Finance received the European Lessor of the Year Award.”

In terms of the strategy, Bouillon explains that SG Equipment Finance enjoys global relationships with equipment manufacturers and these important relationships factored critically in the plan for a successful entry into the U.S. market. He emphasizes, “The point of all of this is that we weren’t coming to the U.S. just for the pleasure of adding another country to our map, the point is that these relationships were important to launch this venture. We asked our key equipment manufacturers, ‘If we were to think about launching something in the U.S., would that be of interest to you?’ Happily, they responded positively.”

Bouillon continues, “And of course, Philippe’s first task was to hire his key people and to find office space. You know, you really have to start from the ground up. And then Philippe, Larry and Juergen had another important task … to drum up new business, that is, to pay a visit to all of our partners and key vendors so that we could book some transactions and begin to generate revenues.”

Was the timing right? “I think so,” Bouillon says. “We have been lucky in one way because when we were entering the market, some of our competitors began retrenching or decided to stop doing business all together.” But as with anything else, ambitious goals are rarely met based solely on a competitor’s actions. And he is quick to add, “We financed more than $200 million last year and we have been very selective and even more careful of course in this business environment. And even though the U.S. market is declining overall, we have grown at a very fast pace.”

Running the Business: Now and in the Future
We noted that a portion of SG Equipment Finance’s new business volume in 2008 was generated through syndication activity. Bouillon addresses this point, “If you want to have a significant presence in the U.S., you need to be active in syndication. And of course, it’s an ‘easy’ way to enter the market. But that will be declining on a percentage basis as we go on. Our business has always been based on specific relationships with our vendors.”

And Bouillon isn’t bashful about stating his vision for the U.S. franchise gaining prominence within the whole of SG Equipment Finance. “We are very ambitious and, at the same time, we will continue to be very careful and disciplined. We will never chase volume, and of course, we will take advantage of the current market conditions,” he states. “SG Equipment Finance has a presence in 25 different countries with 2,700 employees worldwide … and the U.S. is still very small. But in time, our goal is to have the U.S. be one of our top four markets.” And this ambitious goal, he says, will be accomplished by embracing a simple model: be focused, be disciplined and look only for the best deals.

As for the challenges of doing business in today’s economic conditions, Bouillon sees it as a matter of grappling with a quandary. “Here’s the challenging part, in an environment, which nobody has really experienced before, we as bankers and financial institutions are trying to predict the future by looking to the past. How do you do that when everything is broken? And what’s challenging on a day-to-day basis is making sure your credit decisions are sound, which in addition to hiring the right people, are the most important decisions we make.”

But, of course, the equipment finance business comes with its rewards. For Bouillon, he’s very proud to be part of what he calls “the real economy.” “Bankers,” he notes without apology, “most recently have been rightfully blamed because they went completely berserk by investing in derivatives that they didn’t have any real sense of.”

In contrast, equipment financing offers Bouillon the following reward: “What’s reassuring and very rewarding about this business is that we finance medium-sized companies — the ones who are generating economic growth and hiring people. I’m very happy to be a very small part of what could be the recovery in this country. For me, that’s by far the most rewarding part of the business line.”

Stuart P. Papavassiliou is the senior editor of the Monitor.

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