Geneo to hold final close for mezzanine impact fund by year-end

Wahida Ahmed
15 August 2022

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France-based sponsor Geneo Capital Entrepreneur is raising an impact mezzanine fund with a EUR 200m target that it expects to close at the end of 2022, Mathilde Paoli, partner at the sponsor, told Unquote.

The fund was launched a year ago and held its first close in May 2022 on EUR 80m, said Paoli.

Geneo Mezzanine does not have a fixed hard cap, according to Paoli. "The real money available will be much larger than our target as we will be doing significant co-investments; there is a strong demand from our LPs to co-invest," she said. "We will have 2-3x more than our EUR 200m target."

LPs that have committed to the fund are mainly based in Europe and include MACSF, COVEA, Crédit Mutuel Arkéa, BNP Paribas, Crédit Agricole and some entrepreneurs, according to Paoli.

"We have noticed that companies do not just want financing but also require advice and coaching to help them understand impact," Paoli said. "They need quasi-equity because they want to reinforce their balance sheet. Usually, mezzanine investing is passive but we provide mezzanine with a confirmation of impact."

Positive impact
The fund will make its first investment by the end of 2022, aiming to make around 10 or more deals during its lifetime. This year, the fund plans to make two investments, she said.

It will deploy initial tickets of EUR 5m-80m with a sweet spot of EUR 10m-EUR 30m; with co-investments this would be EUR 40m-EUR 50m. The sponsor takes quasi-equity stakes, which are structured by way of a bond, said Paoli.

The fund will target companies mainly located in France and other European countries, including Belgium and Germany, with EUR 5m-EUR 80m in EBITDA, said Paoli.

Although the sponsor is sector-agnostic, it wants to make investments that have a positive impact on the economy. Sectors that interest the sponsor included education, healthcare, and particularly industrials as the industry is in hiring mode, she said.

Around 30% of the fund will be reserved for follow-on and build-up opportunities, she said.

Coaching to success
The fund follows the Green Bond Principles set out in the criteria of the International Capital Market Association. The criteria provide a checklist to support issuers in financing environmentally friendly and sustainable projects that promote a net-zero emissions economy and protect the environment. Firstly, Geneo will make an impact diagnosis ahead of the investment. Once it has invested in the company, it will formulate an impact plan and set three to four bespoke impact goals that fall under the sponsor's coaching program, Paoli said.

Examples of Geneo's current impact-focused portfolio companies include France-based Magiline, an environmentally responsible swimming pool manufacturer. Geneo invested in Magiline alongside Bpifrance in February 2021 as part of a capital reorganisation, according to a press release.

Geneo was founded in 2019 by Fanny Letier and François Rivolier in Paris. It has a team of 20 employees, of which 40% are ex-consultants who provide operational support to portfolio companies. Its mezzanine team is comprised of four people, according to Paoli.

The GP is aiming to reach EUR 1bn AUM in three years' time for the Geneo Capital fund, its main evergreen vehicle that typically invests in industrials and business-services sectors. However, it keeps a sector-agnostic approach to its investments.

As well as its private equity and mezzanine funds, Geneo manages a vehicle with EUR 220m in AUM that manages an eight-year non-convertible government bond program dedicated to mid-cap companies, which is financed by French insurance companies, as reported by Unquote sister publication Mergermarket.