Consilium kicks off Italian fundraising

Italian fundraising has reached its nadir, with just one final close held in the Bel Paese in the last 12 months, according to unquote" data. As the country continues to wallow in its macroeconomic woes, sentiment is improving in the private equity industry as several key players are tempted back into fundraising by the promise of an imminent recovery coupled with low valuations.

Consilium is one such investor. This month, the GP launched its third fund, Consilium Private Equity Fund III, with a cautious target of €150m – equal to that of its last vehicle. "We are optimistic," says Antonio Glorioso, partner at Consilium. "Italian companies have very low valuations, but there are many niche leaders. And there has been a real turn in sentiment."

A first close of the latest vehicle is anticipated in December on around €90m and the GP has already secured the backing of two institutional investors in its previous fund, one of which has doubled its commitment. The fund will take controlling stakes in 8-10 Italian firms with an enterprise value of €20-80m. In line with industry standard, management fees stand at 2%, with 20% carried interest and an 8% preferred return.

"We aim to offer a fair valuation of around 6-7x EBITDA on average," says Consilium partner Stefano Iamoni. "The average leverage ratio is 2.5x EBITDA." Sectors of particular interest include food, automotive, consumer goods and retail and the GP intends to expand its exposure to Tuscany, Lazio and Marche.

"We have a very top heavy approach to due diligence," said Iamoni. "We do a lot of due diligence to ensure we have as much knowledge as possible of the sector in order to maximise our chances of a profitable exit from day one." All target companies will be sourced through private networks, as has been the approach since day one, and will likely be family-led businesses facing succession issues – a typical scenario as the Italian population ages.

Frozen foods manufacturer Gelit is one exception to the rule, as it was sourced through an auction as required by the then owner Barilla. In 2007, the GP bought the firm in a transaction that allowed Barilla to focus on its core business – pasta and bakery. Centrobanca provided a leveraged finance facility to support the deal, according to unquote" data. Gelit had an enterprise value of €21m at the time of the deal. Fast forward five years to exit. Consilium sold the asset to US-based manufacturer of frozen foods and snacks Ralcorp Holdings in 2012. The GP reaped a 3.7x return on the sale.

"We hired a new CEO from day one, and a new CFO within the first month," said Roberto de Rossi, partner. "We set up international sales and invested around €700,000 in a new IT system, which meant the firm could maintain better cost control." Under the GP's ownership, the firm's sales grew from €24m to €36m and EBITDA increased from €3.4m to €6.2m. Acquisition debt was repaid within five years.

"All of our investments have been positive – none are a loss," explained Iamoni. "We have had around 20 liquidity events across both our previous funds, including partial sales, dividend payouts and exits." And profitable exits there have been. Yesterday, the investor divested its stake in Rollon alongside Ardian, reaping a 3.3x money multiple and 42.9% IRR. The GP's second fund, Consilium Private Equity Fund II, has a distributions to paid-in ratio of 70%. Its first vehicle reaped a 4.4x money multiple and 63.4% IRR.

The quietly confident GP has skin in the game and will commit more than 2% of total capital raised. "As a result of the crisis, the companies that remain are more solid," says de Rossi. "They've been restructured, and have strong exports. The target companies now available in Italy are of a better quality and there are fewer competing private equity firms."

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