Kasper Wichmann
Welcome to Balentic Edge. Today we’re joined by Thomas Friedberger, who is Group Deputy CEO and Co-CIO of Tikehau Capital and CEO of Tikehau Investment Management. Thomas joined Tikehau in 2014 after 14 years at Goldman Sachs, where he was an MD overseeing France, Belgium and Luxembourg. Welcome Thomas.

Thomas Friedberger
Thank you very much, Kasper

Kasper Wichmann
Thomas, you had a distinguished career in capital markets before joining Tikehau. What brought you over to Tikehau and how has your role evolved since then?

Thomas Friedberger 
Well, actually what brought me to Tikehau is the entrepreneurial spirit of this company created in 2004 and the excitement of contributing to actually creating a European leader in asset management together with bringing values and global extra financial values.

I’ve always been convinced that there will be no pivoting of our economic system model towards a more sustainable model without bringing financial value. And that’s exactly what we’re doing.

Kasper Wichmann
So Tikehau has grown into a European powerhouse, and yet it may not be that widely known. So for our listeners who are woefully under informed, can you give us a little bit of an overview? What’s the investment philosophy and how does this in particular influence your approach to sectors like aerospace and defense, which we’re going to spend a bit of time on today?

Thomas Friedberger
So we’ve been actually 50.6 billion euros a bit more in US dollar. We are a 21 year old company, involved in four different asset classes, private equity, private credit, real assets, and liquid strategies. And the common thing between those four pillars is that we want to be able to invest across the capital structure of companies, from senior debt to equity instruments, and anything that sits in between those companies being listed or private.

So it gives us the 360 view, meaning that we are asset pickers, not necessarily asset allocators, but asset pickers. And our structure is based on local sourcing of transactions, because as we say, good gives have no meat, so you need a lot of local penetration to be able to source the best transactions, as well as alignment of interest. Our balance sheet is a 5 billion euro balance sheet, invested 70 % in the fund we manage so that we are one of the largest LP of all the funds we manage

we are more than aligned and will be the first to suffer if we make an investment mistake and we have a culture of being disciplined investors because we put our own money at risk together with our investors.

Kasper Wichmann
and putting that maybe specifically into the context of aerospace and defense.

Thomas Friedberger
Yes, absolutely. we actually acquired in 2018 an asset manager specialized in aerospace, defense and cybersecurity from the private equity side called Ace Capital that has been fully integrated with our private equity team at Tikehau making aerospace and defense on one side and cybersecurity on the other side two of the four verticals in which we invest in private equity. And our motto is create don’t compete. So we’ve been lucky enough to have this expertise in house when COVID crisis hit. We managed to bring together four European OEMs in aerospace and defense, namely Airbus, Thales, Dassault, and Safran, together with the French state to create a fund with the target of consolidating the supply chain of aerospace and defence in Europe. Fast forward to today, Fund One is now fully invested. Europe is waking up on those defence topics. And so we are happy to be at the centre of the defence ecosystem and financing effort in Europe.

Kasper Wichmann
I want to double-click a little bit on that because it seems almost like you knew something that the rest of us didn’t know. You acquire another manager in 2018, which arguably gives you something that very few other European managers have, experience within aerospace and defense, cyber security. What prompted that? What did you see that others didn’t see?

Thomas Friedberger 
Well, actually, it’s a very strong conviction that the economic value creation in the world was switching from the creation of the generation of efficiency to the generation of resilience. Let me explain. from 1982 to 2022, so for 40 years, interest rates have been going down constantly. mean, you know, Fed interest rates went from 20 % to 0% and globalization has allowed all the economic actors in the world to over-optimize a lot of things from the place where they are producing goods and services to the place where they are paying taxes to the capital structure they were operating with with very thin I would say cushions of equity and lot of debt because the visibility was given to them thanks to globalization and lower interest rates and this changed completely first with covid then with the war in ukraine then with deglobalization and the policy led by the US to a world where higher interest rates and deglobalization will force companies to create resilience and this has a cost. So our conviction, is, you know, cost of getting insured. against climate change, cybersecurity, insurance, corporate insurance, operating with, larger capital buffers, less debt, more inventories, producing closer to the consumer. All of this has a cost and so our conviction was that we were entering into a world of lower growth where the pillars of high growth will be focused on the solution providers of these products. and aerospace, defense and cybersecurity are definitely sectors where companies are the enablers of this resilience. And so we’re convinced that in order to perform good private equity practice and generate constant performance in a world of lower growth, investing massively in those sectors and putting the resources was actually the right thing to do.

Kasper Wichmann
Well, today, it seems almost precinct. The other side of that coin though is also very interesting because, and I think you’ll agree with this, defense has for a long time been a complete no-go zone for institutional investors, too political, too opaque, too controversial. And now LPs and GPs are piling in. What has changed? And do you think that’s actually a sustainable change?

Thomas Friedberger 
Yeah, so a couple of things have changed. First of all, mean, of course, the war in Ukraine, so bringing war to the European territory has been a big changer. And then the US election, and the fact that the US are actually spending less in protecting their allies, has triggered a wake-up call for Europe The other angle is that defense was considered as excluded or actually not wished in the ESG compliant portfolio before. Let me, be precise on this because that’s very important. First of all, I mean, at least our fund the aerospace and defense practice that we have and the cyber practice that we have, are not about financing weapons.

Also what has changed over the last couple of years is that in the context of the net zero connectivity effort, the aviation part of the European aviation investing in aerospace and defense has actually been integrated in the taxonomy, European taxonomy since 2023. Also, you know, the world is starting to understand that financing defense and aerospace and defense is actually, part of building the European sovereignty. And so if you want to bring an economic model, which is in between what the US are pushing in terms of democratic models but very very skewed towards capitalism and a model pushed by other large economic powers which is more authoritarian and less democratic, we need to defend that model and defense is paramount there. So this is what has changed

Kasper Wichmann
So we’re seeing the LPs lean in and starting to understand this. We’re seeing the GPs start to lean in. And one of the things we’ve seen Bain & Co put out a report, that defense surged in early 2025, global deals matching in the first quarter alone, almost entire year of 2024. How are you now positioning yourself coming up with a fund to capitalize on these opportunities, particularly in Europe?

Thomas Friedberger 
so what we have to understand is that this sector is a very high growth sector for two reasons. One reason is now the fact that the military spending is massively increasing in Europe.

yesterday Germany mentioned that they could consider having military spending as high as 5 % of GDP. France might also go that route, the target for NATO countries being to transition from 2 % to probably 3 % but also maybe a bit more soon. So high growth created by the demand in military spending but also the high growth that

on the civil side. There are currently 24,000 planes in the world, 18,000 need to be replaced progressively by more efficient programs because part of the net zero effort is about replacing the fleet with units that are more efficient in energy consumption,

the Airbus A350 for example, or the Airbus A320neo, and that comes for about 30 % of the path to net zero, another 60 % being to jet fuels, sustainable jet fuels. So that’s very important to understand because if we want to follow the demand and the increase of the air traffic plus the replacement of those planes,

about 40,000 new planes to be brought to the market between now and 2050. So just with the civil angle of the aerospace sector, you have a very high growth trajectory. So if you add to that, the military spending, we end up with a portfolio, for example, of Fund I So Fund I having been invested between 2020 and 2024, which is actually, which has actually

12 years of backlog on average, is massive. It’s a very high growth sector on top of doing the right thing for Europe.

Kasper Wichmann
So behind your strategy, and it’s important to emphasize it is both aerospace and defense, you’ve actually got two mega trends. You’ve got the green transition, which is very, prominent Europe. And then you’ve got defense, which is also very, prominent. Does that cause you any sort of concern in terms of how much momentum is actually in this? What does that do to the valuations? What does that do to attract competition?

Thomas Friedberger
So that’s a good question. And the answer is actually the trend is just starting. when you look at, for example, the past in civil aerospace, it took 20 for 30 years to Airbus to become world leader in providing civil aircraft. So we think that those trends are actually long-term trends. This industry is about,

manufacturing a small number of large objects. So by definition, you need a lot of capex and a lot of research and development. So the trend is not a fashion. It’s not going to start now and end in two years. That’s the first thing. With regards to valuation, what we’ve noticed is that in the listed world, most of the OEMs, the large companies in this sector are listed.

The sector has benefited from a massive revaluation, but in the private space, it’s not that obvious because the supply chain is extremely fragmented. we have in Europe about 3,000 companies involved in the aerospace and defense supply chain. Hundreds of startups in space, cyber, quantum computing, that will also contribute to what the

which is a very efficient way to conduct modern war. So you are dealing with thousands of smaller companies and you have actually very few investment teams in Europe having the capabilities to deploy capital right now just because this sector was not necessarily in fashion before. So what this sector needs is actually equity. This sector needs two things. It needs to create European champions by doing build-up. So you’re buying the strongest potential platforms and then through build up, create those European champions and accelerate the delivery of products through capex. So injecting this equity will be done probably by a very limited number of asset managers because building the expertise is not obvious. I mean, we have a team of 20 people in aerospace and defense plus 10 people in cyber security. Most of them come from the sector itself, from European Union, the United States, etc. We have partnerships with those, those corporates. have partnerships with the public sphere, not only in France. And that takes time to build. And so with regards to valuation, at the moment, you know, the valuation in the private sector in aerospace and defense have not been inflated by the increased focus

that this sector is actually enjoying right now. So the opportunity is still there.

Kasper Wichmann
But in a fragmented landscape, should we then worry about, especially on the defense side, very large concentrated customer base? It’s typically governments buying a lot of these things, the same thing for airplane manufacturing.

Thomas Friedberger 
Well, it has always been the case in this sector, but the fact is, you take, for example, a player like Dassault manufacturing the Rafa and Falcons, this industry is dual. All those companies make civil and military models. so, for example, Dassault has this private jet program called Falcon and this military jet program called Rafa.

Tassos actually was a company that two or three years ago had a backlog of about 60 planes per year with regards to the RAPAL with only one client which was the French Army. you look at Tassos four years later, the RAPAL program has now a backlog of about 230 to 240 planes and clients are completely diversified. they are now selling products to India, to Qatar. And so this will be the case for most of those companies. So the number of clients will remain probably more concentrated than in other sectors, But they are starting to diversify And the fact that Europe needs to continue to collaborate with the United States on aerospace and because supply chains are very very integrated on both sides of the Atlantic but also start to create their own sovereignty and their own continental champions will probably provide a lot of new clients to those companies.

Kasper Wichmann
Your strategy encompasses both support capital and platform investments. For listeners, could you elaborate a little bit on what this means and how they complement each other in building the businesses?

Thomas Friedberger 
Yes, absolutely. those companies in the supply chain of aerospace and defense the typical example is a family-owned company with one or two different clients, needing capital, but not only capital, so our role is to bring patience and stable capital, but also network and expertise. Network in other countries, so if we want to perform build-up and create European champions, we can bring to our portfolio companies acquisition targets, but we can also open new markets by opening offices in the various countries where we have a footprint So we can help them find new markets, new clients, but we can also inject expertise thanks to our network of operating partners and we have more than 15 operating partners just for aerospace and defense to help those companies to get to the next step which is increase the speed of delivery, and better optimizing their industrial process. So this is all at the same time, and that’s I would say, the beauty of having the private equity team focused on one sector with a lot of sector experience

Kasper Wichmann
I want to touch on the point because you said a few times building European champions. Is that in today’s environment without diving into the politics even possible? Because we are seeing more nationalism also within Europe. We want to build our own local Danish champions, German champions, French champions, Is it realistic to create true pan European champions?

Obviously Airbus is a very good example, but can we do more of that?

Thomas Friedberger 
Well actually it will have to happen. there is no choice. Those companies won’t have the same international marketplace if they are not European champions in front of the American champions or the Chinese champions or other types of competitors.

It’s already happening. As you rightly said, Airbus is a very good example of what Europe can achieve when it is united. There are other examples already happening in the defense sector. Let me give you couple of examples. For example, the Armored Vehicle Makers, KMDS in Germany, Rheinmetall in Germany and Thales from France formed a joint venture that will develop a future main battle tank for Germany and France that was signed in early 2025. Colesbury, Norwegian company and Naval Group, French company signed last week a partnership agreement around the development, the production and the support and share marketing on their products. Just last week, EU capitals have agreed to launch the 150 billion loan for arms fund backed by the block’s shared budget. So it’s a European pool of capital, of financing taken on the European Commission’s budget to finance European defense efforts. So all those initiatives being on the financing side or on the technical collaboration side are happening.

It’s happened pretty quickly and that makes me pretty optimistic about the ability of European countries to overcome the pure local politics and make it a success as Arbus has been a success.

Kasper Wichmann
You touch upon the team as well. Looking at the team, what is it that makes the team special? What’s a unique expertise? How does it contribute to value creation? Can you dive into that a little bit for us?

Thomas Friedberger 
Sure, mean it’s a team that has been investing in aerospace and defence for more than 20 years now because the base capital has been funded in year 2000 it’s a team of 15 dedicated investment people in aerospace and defence plus 10 people dedicated to cyber security investing. So those are two different funds but they are collaborating all together plus as I said 15 operating partners so plugged in the portfolio companies to help them deliver their business plan. we’ve been managing more than 2 billion euros in aerospace and cyber already

It’s not an expertise that we have created two weeks ago just because the theme is in fashion. We have 45 portfolio companies in aerospace and defence and 20 portfolio companies in cyber. So it’s already a pretty large footprint. We have signed partnerships with OEMs, with the public sphere, and we have a track record in aerospace and defence on the fund we launched in 2020 during the covid crisis.

exit position already have 2.7 times the money at 45 % IRR for a fund which is not a venture fund, it’s very good. The EBITDA growth that was mentioned before in the portfolio is about 48%, so you see the growth that there is encompassed in this sector. And just to give you an idea about the selectivity, on our last fund we considered 400 companies and ended up with 14 investments. So it’s a 4 % conversion rate, meaning that 96 % of the deals we look at, we don’t do. So in order to that, you need really an expertise. And with regards to the solutions, we can provide control or co-control solutions. We can invest in niche players and in platforms. We can invest in tech, in services, in industry also. We can cover the full spectrum of the ecosystem and bring financing to this essential element of certainty.

Kasper Wichmann
North America historically has absorbed a major private equity backed investments within these sectors. Europe being comparatively smaller. Is there enough capital? Can you deploy enough capital to sort of bridge investment gap we see here and attract more capital to European defense?

Thomas Friedberger
So it will take time, of course. I will add to that maybe that also we have an expertise in listed equity. So it’s not only private equity. This equity we launched a couple years ago, a fund called Tikehau European Sovereignty Fund. And this fund invests in listed companies involved in creating this European sovereignty. So we can invest both in private and public companies. But yeah, regards to your question, the cooperation with the

Kasper Wichmann
Yes.

Thomas Friedberger
With the US will still be necessary. full independence will not happen overnight and it will probably never happen also for the reason I was.

mentioning before which is that the supply chains are deeply integrated. It’s also the case for Boeing. More than 50 % of the supply chain of Boeing is outside of the US, mainly in Europe but also a little bit in Japan. So there is still a very strong incentive on both sides of the Atlantic to collaborate, and remain, allies. So there is no way this is going to change anytime soon. But you’re right, the essential element of building our sovereignty is to route enough savings and obtain on the other side enough public budgets to inject capital massively in the building of this European sovereignty. There is no reason why we shouldn’t achieve that. I would paraphrase the head of the strategy of Airbus who was actually a speaker at one of recent event this person was saying, if you bring to us enough capital and if you help us to retain our talents, so avoiding our talents to go elsewhere, there is nothing today that America can do, can manufacture, where we don’t have the technical expertise. So it’s very, I think it’s very optimistic, but it’s also very

realistic to think that on the long term path Europe has a say and we can continue to be the very strong expertise in that sector independently.

Kasper Wichmann
if I ask you to put an LP hat on, what should LPs investing into these sectors be thinking about?

Thomas Friedberger
it’s going to be a long term trend so

In order to be able to deploy capital quickly and in efficient manner, you need, and we witness that every day, you need a very strong local footprint. you trust asset managers having offices in the different countries where you invest. It’s especially true in this sector because there is a very strong political angle, as you said. So if you are an American private equity firm, for example, trying to invest in this sector, probably that it will be

much more complicated than if you are Danish GP or French GP, but also if Danish or French GP or German GP, you need it.

offices in everywhere in Europe to be able to engage into a dialogue with the local authorities. So for example, we have nine offices in Europe, and seven of those nine we have investment teams on the ground. The second thing to be able to deploy capital quickly is obviously an experience team with resources. And the fact that you have a lot of

new funds getting launched right now just because of course there is a very clear instructions from the public sphere that there should be more capital heading to this strategy might be an element of concern for some LPs because those teams will take time to be created it will take a lot of time for them to source the transactions because you need to be plugged with the corporates of the sector and so the ability of asset managers

that are starting now to build an expertise to deploy capital in an efficient manner will take a lot of time.

Kasper Wichmann
So if I summarize that LP should be looking for size, because scale matters in this in terms of footprint, they should be looking for European GPs, at least if they want to pursue European defense, and they should be looking with somebody who has significant domain expertise, i.e. not a generalist, branching into it Is that a correct summary?

Thomas Friedberger
That’s correct. And also, we need to keep in mind that if you look at the US or Israel, for example, which are very efficient integrated models between civil and military, between public and private sectors, you realize that the military innovation has always brought a lot of skill over application in the civil world. So that’s also an element of growth that needs to be taken into account. For example,

If we want to be champions of collaborative warfare, which is those smaller objects that go on to connect altogether, we will need to invest massively, and this is a priority of the different governments in Europe, they know that perfectly, in space, AI, cyber, quantum computing, this will have significant spillovers Also, there is a case for reconverting existing companies or existing assets into the military effort.

So my message is it’s not only investing in defense per se, it’s also investing in sector where you have a lot of engineering, a lot of brain power that will also create applications for the rest of the European

Kasper Wichmann
Thomas, we have time for just two lightning round questions

Thomas Friedberger
Yes, sure

Kasper Wichmann
So what’s more challenging convincing an LP to back defense or navigating European regulation?

Thomas Friedberger
European regulation will need to be easier to understand for both GPs and LPs to unlock this fantastic potential that Europe has because we have the talents. We will have more capital.

So I think regulation is something that Europe is probably

suffering from a little bit right now. I’m optimistic it will get easier as long as there is this very clear dialogue between the public sphere and the private sector.

Kasper Wichmann
A second question.

What is the one thing that most LPs get wrong when they think about the defense sector today? What’s the most common misunderstanding?

Thomas Friedberger
The misunderstanding is that defense is about manufacturing weapons. Not only that.

Right? Everything that we said today, I hope, will contribute to proving that it’s an industry which is dual first. there is no single player which is military only. It’s military and civil. And there are lots you know, a spillover of innovating in defense possible for the whole economic system. So defense is an essential element of sovereignty and it’s an essential element of building, you know,

European resilience.

Kasper Wichmann
think resilience is actually the operative word here for all of these to think about.

Thomas, thank you for being on Ballantic Edge and for sharing insights about the future of aerospace and defense investments and Tikehau’s house approach with our listeners.

Thomas Friedberger 
Sure, thank you very much for having me and it was a pleasure.

Kasper Wichmann
Fantastic. And lastly, I also want to mention particularly to our Danish listeners, some of Thomas’s colleagues from Tikehau will actually be in Copenhagen next week on the 27th. And they’ll be here to talk about challenges of European defense. Later on, they will visit, I think, both Helsinki and Stockholm. So it’s a great opportunity to continue the conversation with Tikehau on a more face-to-face basis.

Thank you again for joining us in this episode and thank you to our listeners for joining Balentic Edge.