Capza sees solid demand for Flex Equity strategy as fifth fund reaches two-thirds deployment

Capza 5 Flex Equity held a final close in 2021, as reported by Unquote. The fund provides flexible financing solutions in the form of equity, convertible bonds and mezzanine, as reported.

The vehicle operates in a small and midcap market which has not been impacted by a lack of bank funding, although debt has become more expensive and tied to stricter conditions, Bernez said. Since banks are more cautious, a flexible funding offer like this fund “makes a lot of sense”, he said. It enables Capza to remain competitive when faced to banks for nice assets such as Neo2 which did not have issues when it came to secure funding, he added.

Capza plans to continue to deploy its vehicle this year with “a couple more deals to expect”, including in Italy or Spain, Bernez said. It has deployed around two thirds of the total amount it collected, he added.

Capza 5 Flex Equity mainly invests in equity, both in exchange for minority and majority stakes, he said. It targets SMEs with EBITDA of EUR 4m-EUR 20m in France, Spain, Germany, Italy and Benelux, he added.

The vehicle has a broad investment strategy with no sector focus, although it has interest in B2B services, exemplified by Neo2 and French fire safety systems specialist Eurofeu, which Capza acquired in 2020, he said. When investing, the key criterion is the alignment with the target’s management, he added.

He declined to specify the fund’s limited partners, although he said that over the last ten years, Capza has been working on expanding its footprint in Europe in order to strengthen its reach, as well as its investor base.

Neo2 growth plans
Capza announced this week that it is in exclusive negotiations to acquire a minority stake in process industry and infrastructure consultancy Neo2 via Capza 5 Flex Equity, as reported. The deal is expected to be carried out by the end of July, the partner said.

The firm will be a minority investor alongside peer Turenne Groupe, which reinvested in the new deal. Founder and current Chairman Fabrice Lidy will own a majority stake alongside management, with new members investing in the business during the transaction.

The auction process, organised by Natixis Partners, was “very competitive”, Bernez said, adding that Capza was in the second round with French PE firms Qualium Investissement and Andera Partners. The firms were reported to be competing for a 40% stake. French state-owned investment firm Bpifrance also invested in the business, Brenez said.

Established in 2008, Neo2 employs 500 consultants across several regions of France. 

The business, which is headquartered in Levallois, Paris region, will first focus on organic growth by strengthening its offering in the process industry as well as in the healthcare, energy (including screening nuclear solutions) and environment markets, he said, adding that it plans to double its size by the next four to five years. Neo2 aims to register around EUR 70m revenue this year, as per an official press release.

Capza also aims to support an external growth strategy, he added. France is an “essential” part of this approach, while in Europe, Neo2 would focus on the Benelux, Italy and Germany, countries where Capza has a local footprint, he added.

This March, Neo2 bought domestic peer Kemtec Ingénierie, which registered around EUR 2m revenue at the time, he said. Neo2 would target companies with a size in line with Kemtec or larger, he added, declining to give further details. 

The deal is a perfect illustration of Neo2’s external growth strategy, which consists of acquiring expertise in complementary products to its core business, Bernez said. Kemtec Ingénierie offered advisory packages, while Neo2 has expertise in technical assistance, he added.

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