Cathay to close latest small-cap fund in early 2023 on up to EUR 350m

Myriam Mariotte
23 September 2022

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France-headquartered Cathay Capital plans to hold a final close for its Small Cap Fund IV in early 2023, raising EUR 250m-EUR 350m, partner Fabien Wesse told Unquote.

Fund IV's first close took place in March 2021 on EUR 155m, he said. The vehicle, which focuses on healthcare, software and consumer, has now collected a total of EUR 230m, he added.

Cathay's management waited for the previous fund, Cathay Small Cap III, to be nearly entirely allocated before launching Fund IV, the partner said. Small Cap III held a final close on EUR 230m in 2017, he added.

With its newest small-cap fund, Cathay will mainly target the US and Europe (France and Germany), as well as China and Southeast Asia, he added.

Potential targets for this small-cap strategy would be companies with a valuation of EUR 40m-EUR 100m or with EUR 10m-EUR 150m in revenues, Wesse said. The firm is on the lookout for companies that are growing rapidly, have demonstrated their concept and are profitable with a positive cash flow, he added.

The French sponsor aims to complete around 15 investments from Fund IV and to deploy it entirely by 2024, with four to five deals completed each year, he said. The average equity ticket is expected to amount to EUR 15m-EUR 20m, he said.

Small Cap Fund IV has already completed six acquisitions since early 2021 in China, France and Germany, for an amount totalling 45% of its target size, he said, declining to give further details.

The fund acquires minority stakes in companies with little to no leverage, Wesse said.

No advisor has been mandated for sourcing the upcoming deals, as Cathay selects them on a case-by-case basis, he said.

The PE firm is implementing its exit strategy, with 50% of Small Cap III's portfolio already sold, which the fund plans to increase to 100% by year-end, he added. Cathay aims for a 2.5x-3x net investor exit multiple and a net IRR above 20%.

NeoXam, a French developer of buy-side and sell-side software that Cathay had acquired through its Small Cap III fund alongside Bpifrance in 2018, is currently on the market, as reported. Both owners distributed marketing materials to prospective buyers this September via sellside adviser Macquarie. The company is being marketed off annual EBITDA of around EUR 17m.