Astorg closes Mid-Cap Fund on EUR 1.3bn

Park Hill acted as placement agent, while Simpson Thacher & Bartlett provided legal advice.

Astorg Mid-Cap Fund was launched in October 2020 with a target of EUR 1bn.

Astorg’s flagship fund strategy generally targets businesses with enterprise values of EUR 400m-2bn. Astorg VII held a final close in January 2019 on EUR 4bn. It deploys equity tickets of EUR 100m-400m.

Astorg Mid-Cap will focus on Astorg’s core geographies of France, Benelux, DACH, UK and Southern Europe and will maintain its focus on software, industrials, business services and healthcare, but will target smaller deals that Astorg’s flagship funds.

Managing partners Lionel de Posson and Edouard Pillot will lead the Mid-Cap strategy.

De Posson joined Astorg from Sun Capital Partners in 2020. Prior to his 13 years with Sun, he spent two years with JP Morgan in London and Paris. Pillot also joined Astorg in 2020, having spent 14 years as a London-based partner at KKR, heading its European Industrials platform.

Managing partner Lionel de Posson spoke to Unquote about joining Astorg and the rationale behind the fundraise. “Both Edouard [Pillot] and I had comfortable positions with our existing firms before joining Astorg, but we wanted to do something more entrepreneurial,” he said. “At the same time, Astorg were thinking of expanding: they had been a mid-cap investor for most of their lifetime, but given their success they grew in deal size, fund after fund. Launching a dedicated mid-cap fund was the perfect opportunity to re-enter this attractive segment of the market, leveraging on Astorg’s strong mid-cap franchise, track record and DNA.”

Partners Enrico Grasso, Charles-Hubert Le Baron, Florian Luther and Paul MacDuff also form part of the Mid-Cap investment team, with a further 10 investment professionals. Grasso joined Astorg in 2020 and has previous experience with Hg and KKR, while Le Baron has been with Astor for 10 years and joined the Mid-Cap Fund team as a director in 2020 before being promoted to partner in January 2022. Luther joined the team in 2021 from Cinven, and MacDuff joined in 2021 from Novalpina Capital.

“We will have constant collaboration between the large-cap and mid-cap funds, with a 'One Astorg' culture, thereby generating substantial synergies and helping differentiate ourselves in the market,” de Posson told Unquote. “This enables us to benefit from the strong sector expertise of the firm – especially in software and healthcare, where the large-cap fund has dedicated teams.” The firm’s presence across Europe and the US will also be of benefit, he added; Astorg has offices in London, Paris, Milan, Frankfurt, Luxembourg and New York.

“The mid-cap fund is organised by geography, as mid-cap deals tend to be very entrepreneurial in nature – you need to be close to the ground to managers and local M&A advisors,” de Posson told Unquote. “A lot of mid-cap dealflow is still via primary deals, so having the cultural affinity with the local markets is important. Both of our deals so far have been acquired from founders or managers.”

Although the fund was raised under coronavirus travel restrictions, LPs were convinced by Astorg’s platform, the strategic rationale behind the fund, and its differentiated market positioning via synergies between Astorg’s large-cap and mid-cap strategies, de Posson told Unquote. “We are bringing best practices and scope from large-cap funds to the mid-cap world,” he added.

Astorg Mid-Cap Fund is an Article 8 fund within the EU Sustainable Finance Disclosure Regulation, guaranteeing that it will carry out ESG undertakings. The GP and its portfolio companies undergo ratings by ESG ratings agency EcoVadis, de Posson said. In addition, Astorg is part of the science-based targets initiative (SBTI) and the ESG Data Convergence Project. Both of Astorg Mid-Cap’s portfolio companies have ESG-linked debt facilities, de Posson added.

“We carry out specific ESG due diligence and each business has ESG targets and KPIs,” de Posson told Unquote. “Each person in our investment team also has a specific ESG objective, at Astorg level and at portfolio company level. For example, this might be reducing our carbon footprint, with precise quantitative objectives; making sure that the suppliers of our portfolio have the right ESG accreditations; or making sure we have the right level of diversity in our portfolio companies at management and board level.”

Investors
Astorg Mid-Cap is backed by a range of institutional investors. These include public and corporate pension funds (25%), institutional asset managers (28%), insurance companies (18%), and sovereign wealth funds (4%). Other institutional and high-net-worth individuals make up the remainder of the fund (25%). European LPs make up 70% of the fund, with North American LPs comprising 18%, Middle Eastern LPs 7%, and Asian LPs 5%.

The majority of the fund’s LPs are existing Astorg investors, but the fund also attracted new LP relationships, de Posson said, adding that the fund was oversubscribed. “As we look to develop the fund over the next few years, we have a strong LP base who can support us as we scale up and grow,” he said. “We didn’t have to start with an LP base of smaller investors, we have ones that can follow us in our journey and become long-terms partners. We also benefit from LPs able to support us in co-investments, which is core to our offering.”

Investments
Astorg Mid-Cap Fund targets European mid-market businesses with enterprise values of EUR 150m-500m. The vehicle aims to invest in “B2B global niche leaders” with profitable business models benefitting from secular and resilient growth, the GP said in a statement.

The fund expects to make 10-12 deals in total, deploying equity tickets of EUR 75m-300m (including co-investments). The vehicle will continue to focus on Astorg’s core sectors of software, healthcare, industrials and business services, focusing on France, Benelux, DACH, the UK, Italy and Spain. Although its core mandate is Europe, the fund can invest up to 10% of its capital in the US, de Posson said.

The fund is around 20% deployed across two investments. The fund invested in Opus 2, a UK-based legal disputes software platform backed by Five Arrows Principal Investments, in March 2021 in a deal valuing the company at EUR 350m. In January 2022, the fund invested in thermal printing ribbons producer Armor Iimak in January 2022. 

Asked about Astorg’s deal sourcing process, de Posson said: “We have a very proactive approach to sourcing opportunities, building relationships and convictions well in advance of companies coming to market. This often puts us in a position to have bilateral discussions with entrepreneurs, families and owners, in order to pre-empt transactions. Our sourcing will be a combination of primaries and SBOs. We know the most relevant local advisers, but are constantly open to building new relationships with entrepreneurs and advisers.”

The GP takes a “highly selective” approach, de Posson said, turning down around 90% of the dealflow that it comes across. “This means that we look at fewer situations, but those that we do look at, we can look at with a great level of depth,” he said. “Usually when an asset does come to market, we will be far advanced with our commercial due diligence and our understanding of the company, so we are ready to act with conviction, and often pre-empt. Astorg does this for the majority of our deals and we have done this for both of the deals in the fund so far.”

Asked about the fund’s 2022 deal pipeline, de Posson said: “We want to do two to three deals per year – we are looking across Europe, and we want a good balance across sectors, too. We are also looking for add-ons, especially for Armor Iimak, since there is a lot of buy and build opportunity. The company has done seven acquisitions in the past five years, so they have a track record.”

People
Astorg – Lionel de Posson, Edouard Pillot (managing partners); Enrico Grasso, Charles-Hubert Le Baron, Florian Luther and Paul MacDuff (partners).

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