Mircap nears first close for debut co-investment fund

Mircap Opportunities will make co-investments in Europe and the US, targeting LBO and growth deals. The fund will make five to eight investments, typically investing EUR 10m-25m per deal and taking minority positions.

"Our funds will be EUR 100-120m in size per vintage as this will be a reasonable amount to deploy in a good selection of deals," he said. "We will have around 50% of this amount at the first close and we have one or two deals that we are working hard on, which we hope to close at the start of the year."

Mezzarobba and fellow founding partner François Pinel de Golleville have prior experience at firms including Rothschild, where they set up various co-investment relationships globally, he told Unquote. "During our time with Rothschild, the group formed Five Arrows and decided to move in that direction with third-party capital management," he said. "We kept in contact over time and set up Mircap in March 2022 – we started the real business in September, once we had market authority approval."

After his time at Rothschild, Mezzarobba spent three years with Essling Capital (which was formed via a spin-out from Massena Partners), leaving the firm in 2020, as reported. Pinel de Golleville co-founded Aktor Capital Partners during this time, leaving the firm to set up Mircap.

The founding partners have been able to take forward many of their historical investor relationships to Mircap Partners, with the firm aiming to hold a first close for Mircap Opportunities before the end of 2023 with support from historical investors, Mezzarobba said. The fund's current LP base comprises professional private investors, family offices and private banks.

Mezzarobba acknowledges that now is a challenging time to raise a debut fund. "We don't tick all the boxes for institutional investors at the moment, because even if we have been working together for many years, they might consider us a first-time fund, even if we are not a first-time team," he said. The fund is still open to new investors, he said, but the firm expects the majority of its initial commitments to come from the team's existing LP relationships.

Opportunistic strategy
The GP plans to invest opportunistically, according to Mezzarobba. "Our value-add is about selecting the right people and managers, and we know who the right GPs are in each sector and country," he said.

The firm will typically invest in deals with a minimum EV of around EUR 100m. In the US, the firm can invest in bigger companies and take a more passive role, whereas its investments in Europe will be likely to see the firm take a board position and a more active role, Mezzarobba said.

Mircap is currently seeing strong co-investment dealflow in spite of the challenging market conditions, he said. "PE prices are coming down, but not as fast as the listed market, so they still have space to reduce further," he said. "Leverage is more costly and banks are lending less, and institutional investors are not as present in co-investments as they once were, and that creates opportunities for us as we can make more equity available."

In spite of these tailwinds, the firm will still be selective in the opportunities that it takes. "There are some macro issues that will push us to be extremely cautious and attentive to our selection, and we won't do turnarounds, or even anything close to it," Mezzarobba said.

Future innovation
Mircap's debut fund and its successor co-investment vehicles will have a 12-month investment period instead of a typical three to five year cycle. This will have two major advantages, according to Mezzarobba. "Firstly, any investor will have a lot of visibility on a yearly basis as they allocate, since they will know whether the money has been invested or not," he said. "And secondly, we will have a much shorter duration fund – it will be done in five to seven years. We have no fees on committed capital, just on the invested capital, which avoids the J-curve and means that the net IRR is less penalised."

As Mircap raises more capital, it plans to add further strategies to its portfolio, with the intention of raising a new co-investment fund every 12 months. The strategies that it will look to add in time will include primary fund commitments, given the interest from family offices for this strategy. "We have family offices in our investor base who want us to help them to invest in funds outside their comfort zone – for example, they might know a lot of French funds, but not the US ones or Northern European ones," Mezzarobba said.

"We could also look at secondaries, mezzanine or minorities, but we will always keep in mind that we would like to be a partner to the managers in the market," he added.

The firm's continuing development will also see it develop its ESG strategy, although Mezzarobba acknowledges that it is "tough" for any co-investment fund to take an "active role" in ESG, given that it takes minority positions.

"We can't say that this fund is Article 8/9 because of this, but we know the importance of ESG and we are sensitive to this as a firm and as a team, he said. "We're working hard on initiatives such as setting ESG targets at the outset of an investment, and paying a portion of our carried interest to a charity if these targets are not met."

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