Montefiore expects 100% re-ups for next EUR 1bn-plus fundraise

The upcoming Montefiore Investment VI will be "significantly above" the amount raised by its fifth flagship strategy, which held a final close on EUR 850m in 2020, alongside a EUR 150m co-investment sidecar, Bismuth said.

"We will surprise very positively on fundraising given our outstanding investments," he said, noting that that it is expecting a 100% re-up rate from its existing LPs.

Montefiore's confidence stands in strong contrasts to the wider fundraising woes faced by many of its peers. Setting itself apart from other GPs is its long-term exit track record of above 3x MOIC and 30% IRR, "which is strong in this current environment", he said.

Over the past 12 months, the GP has done three re-caps and one exit, at a time when sponsors "are feeling more difficult to distribute money to investors", he said.

Its past two fundraises were over-subscribed by 3x, the CEO said, with many LPs "knocking at our door" but unable to access its funds, he said.

The uncertain macroeconomic environment has also had a limited effect on its portfolio companies. On a consolidated basis, they are expected to grow 23% in EBITDA terms this year, versus 26% last year, Bismuth said.

"While the fundraising environment requires more time than usual, we believe we can strongly differentiate from our peers," he said.

Existing LPs for Montefiore include Public Pension Fund United States and the Los Angeles County Employees Retirement Association (LACERA), according to Unquote Data.

The GP, which has dry powder for "several more" platform companies in its fifth fund, is hoping to deploy capital at a time of uncertainty, benefiting from lower competition while accessing deals at better terms than in 2021, he said.

"The market is very contrasted," he said. "We see some people that are slowing down their investment pace significantly, partly because they have issues with their portfolio, but also because they're afraid of not being able to raise funds. Therefore, they want to sequence their deployment until a better fundraising environment comes."

Scaling up lower mid-cap businesses
Montefiore's upcoming fund will continue its focus on lower and mid-cap companies active in B2B services, digital and IT services, tourism and leisure, health services, and consumer services, among others. It can provide tickets of EUR 20m-EUR 200m for companies generating EUR 5m-EUR 50m EBITDA, he said.

"Our skill is about accelerating the profitable growth of companies and building long-term profitable growth," he said. "Over the last 18 years, on average, we have invested in companies growing at 8% per year with double-digit margins, and then transforming them into companies growing at 26% per year with the same level of EBITDA margin."

Bolt-on acquisitions play a key role in this, he said, noting that it made 27 add-ons throughout Europe and the US in 2022 alone.

Montefiore has invested in at least 10 companies over the past decade which had an enterprise value of EUR 50m or below at the point of acquisition, he said. Over subsequent years, those companies were scaled up to the point where they are all now valued at EUR 1bn or more, he added.

Montefiore invested in European Camping Group, the mobile-home holidays specialist, in 2005, when it was generating EUR 5m EBITDA. The GP fully exited its stake in the company, alongside Ontario Teachers' Pension Plan and Carlyle, to PAI Partners in 2021, at which time the company generated more than EUR 100m EBITDA, he said.

Asmodée, the board and card game publisher which Montefiore backed from 2007-2013, was most recently valued at EUR 2.75bn when it was sold to Sweden's Embracer Group by PAI Partners last March. Asmodée generated EUR 7m EBITDA when it was bought by Montefiore in 2007, he said.

"We are the best in scaling up companies in Europe," he said. "We are partnering with entrepreneurs that haven't yet scaled up their businesses. 80% of our deals are primary deals."

Delivering on exits
Montefiore is looking to exit "several" businesses for the upcoming quarters, he said.

The firm is evaluating private equity investors' appetite for the sale of French B2B digital services platform European Digital Group (EDG), which could kick off post-summer via Lazard, as reported by Unquote sister publication Mergermarket.

Meanwhile, the auction process for the French insurance Groupe Premium, in which Montefiore holds a minority stake alongside majority owner Eurazeo, was reportedly cancelled.

[Editor's note: The ninth paragraph has been amended post publication to remove an incorrect reference to Los Angeles City Employees Retirement System being an existing LP for Montefiore.]

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