Siparex raises €200m for MidMarket III fund

Greg Gille
12 February 2014

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French GP Siparex has held a final close for its MidMarket III vehicle on €200m, exceeding its €150m target. Greg Gille reports

The GP launched the vehicle in June 2012, days after closing its MidCap II vehicle on €130m. While MidCap II targets businesses valued at less than €40m, the MidMarket III fund invests in buyouts valued in excess of this threshold.

Siparex was targeting a €150m final close – the previous fund in Siparex's MidMarket family, Siparex MidMarket II, closed on this amount in 2008. This milestone was quickly reached: the vehicle held a €90m first close in September after two months on the road, and had already raised €110m by November 2012, thanks in part to a €10m commitment from a Quebec-based institutional investor. The LP was already invested in Siparex's previous MidMarket II vehicle and doubled the size of its commitment for this latest effort.

The GP then went on to broaden the investor base and target additional international investors. The task proved tricky though as France still remained an ambiguous prospect for many foreign LPs. "Selling the 'France brand' has not always been easy, despite an improvement towards the end of 2013," said Siparex president Bertrand Rambaud at a press conference in Paris yesterday. The firm had enlisted the help of London-based placement agent Oliver Froment to market the vehicle to international investors.

Siparex was also able to rely upon its existing LP base. Investors in previous funds – notably institutional investors from France and Canada – contributed to 77% of the amount raised at final close. Notable backers include state-backed BPI France, which committed slightly less than 10% of the €200m ultimately raised.

Overall, institutional investors accounted for 67% of the capital raised. Family offices contributed 25% of overall commitments, a 50% increase on this LP group's weight in the previous MidMarket vehicle. Siparex Associés, the holding that regroups the main shareholders of the Siparex Group, provided 8% of overall commitments to the fund.

Exit run
Head of investor relations Nicolas Eschermann highlighted two factors that enabled Siparex to maintain a healthy re-up rate: "The experience and trust that come with the Siparex brand played a part [the group has been active on the French market since 1977], but our recent track record was also a key element." The GP indeed upped the divestment pace for its mid-market portfolio in 2013, exiting 10 businesses and reaping total proceeds of €55m. Highlights included the sales of Manuloc (4.9x money) and Comat (2.6x multiple). Overall, Siparex generated €200m in proceeds over the 2011-13 period on the mid-cap segment, and a further 15 sale processes are currently underway.

This adds to to the realisations made by Siparex's regional growth capital and venture teams. The GP divested 14 companies from its regional portfolio, for total proceeds of €14m. Venture exits totalled €37m in proceeds.

Meanwhile, the remaining companies in the mid-market portfolio saw turnover grow by 5.1% and EBITDA by 5% on average over the past year.

Italy and mezzanine in the crosshairs
The MidMarket III vehicle will target French SMEs valued in excess of €40m, with a predilection for independent family-owned businesses. The portfolio should total 15-20 companies at the end of the investment period, and the fund will provide equity tickets in the €10-20m range. MidMarket III has already backed three businesses: Malherbe, Nadia and CEBTP.

The final close of the MidMarket III vehicle will also lead to Siparex adopting a more focused approach to mid-cap investments. The GP is aiming to deploy around €70m per year across its two mid-cap vehicles, up from the current €50m. To do so, Siparex intends to invite less co-investors on deals compared with previous years, while the total number of investments across the two portfolios is likely to decrease compared with previous vintages.

Going forward, Siparex also intends to diversify its offering by considering a mezzanine vehicle – a product that has proved popular with French institutional investors in recent months, as shown by the success of Capzanine's latest vehicle, which closed on its €350m hard-cap last year.

The GP will also aim to target opportunities across the Alps: it has struck a partnership with a local institutional investor to deploy a €50m fund in Italy, focusing on SMEs based in the north and centre of the country.