Aside from startups, Luxembourg’s industrial and services ecosystem benefits little from private equity expertise, despite its being one of the most developed in the world. This strength is based on the country’s legal, financial, banking, tax and regulatory coherence and stability, as well as its central position in Europe.

This is regrettable for the grand duchy as a greater proportion of the financial resources managed locally could be invested on its own soil to create European or international champions. Private equity is a powerful tool for accelerating Luxembourg’s targeted multi-sector specialisation, in direct competition with its neighbours.

A dynamic already underway

For some years now, certain private equity fund managers and family offices, which are generally discreet, have been participating in this specialisation. Their front office operational teams, responsible for sourcing and making investments and then supporting portfolio companies, have a strong presence in Luxembourg.

Their cultural proximity with multilingualism, their patient capital horizon (medium or long term) and their international business networks are highly valued assets for company directors.

In the space of three decades, the grand duchy has developed world-renowned expertise in financial, legal and tax engineering, with a total of €1.4trn managed on its territory (source: LPEA Annual Report 2024).

Three levers to convince SMEs

The lessons learned by our colleagues and ourselves to open up private equity to profitable SMEs are based on three pillars:

—Trust: organising sharing and feedback between managers.

—Knowledge: raising awareness of the competitive advantages of being supported by a private equity firm, compared with remaining solely family-owned or between partners, or compared with the practices of their European competitors.

—Culture: evolving the Luxembourg business model, historically based on “close relationships and the uniqueness of capital and leadership,” towards a model based on a “qualified, cutting-edge ecosystem and the integration of international talent, both in capital and governance.”

Look at our neighbouring countries

What are SME managers doing in France, Germany and Belgium? They are clearly ahead of the game.

Between 2018 and 2022, France and Belgium have established themselves as two European pillars of private equity. France leads the way, both in terms of the amount invested (€103.7bn) and the average number of companies backed each year (2,317 between 2018 and 2022) (source: France Invest Key Figures 2022). Belgium, meanwhile, has a remarkable intensity: in 2021, 1,165 companies there were supported by private equity funds (source: Invest Europe, Private Equity at Work), well above the European average for a country of its size.

In 2022, these two countries were also drivers of job creation. Private equity activity supported, and often generated, more jobs than elsewhere in Europe. Belgium stands out in particular, with fund-related employment growth of +12.9% in 2022, outstripping France (+6.4%) and confirming solid momentum (source: Invest Europe, Private Equity at Work).

Germany, with its strong industrial culture, has seen the value of its private equity deals rise from €5.8bn in 2015 to €65bn in 2024 in buyouts (source: Private Equity Investment in Germany 2007-2016 by Statista & PwC Private Equity Trend Report 2025). An impressive development in ten years.

A success story made in Luxembourg

As an example in the grand duchy, Oraxys has completed two successive leveraged buyouts with the historical family shareholders of bespoke door and window manufacturer Wako, in 2016 and again in 2022.

The first LBO enabled the shareholder-managers to acquire the majority of the group from their family, at an independent market value for all members, regardless of their interest. It also served to industrialise the organisation, with the support of a partner who helped to strengthen the teams and processes.

The second LBO, carried out on a 50/50 basis between Oraxys and BGL BNP Paribas, who together became majority shareholders, enabled the managers in the transfer phase to monetise part of their assets. They were able to attract a professional European executive to hand over the general management, and are currently rolling out a growth programme through the acquisition of complementary businesses in the Benelux countries.

An opportunity to be seized

The highway to growth is open to ambitious Luxembourg companies. Accompanied by private equity partners, they will be able to secure their development path over the coming decades--whether through Europeanisation, digitalisation, the integration of artificial intelligence or the transfer of management or assets.

Competitors in France, Belgium and Germany have already taken advantage of this powerful tool. Will the new generation of Luxembourg entrepreneurs seize it?

*Gregory Fayolle is managing partner of Oraxys, who will be taking part in the LPEA Insights conference on 23 October.

This article was originally published in French.