GP Profile: DeA Capital

First established as an investment company in 2006 by the De Agostini group, Milan-listed DeA Capital has since diversified its offering across multiple asset classes, becoming one of the main players on the Italian private equity scene and reaching €12bn in assets under management (AUM) in 2019.

The firm now refers to itself as an alternative assets platform: DeA Capital Alternative Funds spreads its scope across private equity funds, funds-of-funds and credit recovery vehicles; while a real estate division operates from branches in Italy, France, Spain and Poland. The investor has grown organically and also via acquisitions of other asset managers.

"Our private equity division invests in the Italian mid-market to boost the development of the local economy and support the international expansion of our SMEs," says DeA Capital CEO Paolo Ceretti.

DeA Capital Alternative Funds manages Idea Taste of Italy, the first Italian fund entirely dedicated to the agri-food sector. The vehicle held a final close on €218m in January 2017, surpassing its €200m target, and is currently around 71% deployed. It has already exited two companies and plans to make one last investment by the end of the year to reach 75% deployment. The fund sold Italian fast food chain La Piadineria to Permira in December 2017 after a two-and-a-half-year holding period, in a €250m deal. More recently, it sold its stake in beverage specialist Lurisia to Greek soft drinks distributor Coca Cola HBC in September 2019 in a deal that gave the company an enterprise value of €88m, equal to 16x its 2018 EBITDA.

The remaining dry powder will be used for additional bolt-ons aimed at strengthening the portfolio companies' market positions.

Following the success of the first vehicle, the firm recently launched Taste of Italy 2, a buyout fund with a €250m target and €300m hard-cap, also entirely dedicated to the agri-food sector. The aim is to hold a first close by June 2020. The fund is led by DeA managing directors Pierluca Antolini and Andrea Bertoncello, alongside recently appointed managing director Leopoldo Reaño, who is based in Madrid, where DeA has recently opened a new office. Taste of Italy 2 will deploy equity tickets of €20-40m, and primarily target majority and controlling stakes in mid-market companies headquartered in Italy and Spain, generating EBITDA in the €5-20m range.

"With the launch of Taste of Italy 2, we wanted to increase the geographical scope of our investment strategy by also including Spain, where we will be able to invest up to 30% of the capital raised," says Ceretti. "We plan to attract a larger number of Spanish LPs, in addition to our core investors from our previous fund."

In addition to the Taste of Italy range, the GP also manages Idea Agro, a vehicle dedicated to the agriculture sector, which was launched with a €100m target and held an €80m first close in 2018. Ceretti says: "We have added this new vehicle to our array of direct funds with the aim of covering the entire food production industry, targeting both upstream and downstream upon the value chain."

On the funds-of-funds side, DeA has raised several vehicles with a global focus, including Idea I FoF, ICF II and III and Idea Global Growth. It has recently launched its first Endowment Fund, a €75m vehicle that invests exclusively on behalf of Italian banking foundations, and targets private equity, private debt and infrastructure assets in Europe and the US.

Credit focus
The firm is also increasing its activity in credit and restructuring. DeA currently manages two turnaround funds: Corporate Credit Recovery Fund I (CCR I) and Corporate Credit Recovery Fund II (CCR II). These are both dedicated to debt positions held by banks with a special focus on unlikely to pay (UTP) exposures. The funds currently manage €1bn's worth of NPL positions.

"With CCR I and CCR II, the lenders transfer their credits to our funds in exchange for a stake in the credit compartment of our vehicles. At the same time, we use fresh finance to help these companies gather new momentum, recover and start growing again," says Ceretti. "To make this happen, we usually take a controlling stake and appoint a new management team to direct the company's business plan and implement a growth strategy able to bring the business back to the market."

With credit expansion in mind, the group recently acquired asset manager Quaestio's NPL unit, which manages the Atlante funds and the Italian Recovery Funds, with approximately €2.4bn in AUM. In addition, the GP also bought a controlling stake in Italian asset manager Quaestio Holding, the owner of private equity firm Quaestio Capital, which manages equity, fixed-income and multi-asset funds.

"Our strategy consists of providing Italian and international institutional investors with a wide array of investment opportunities, ranging from liquid to illiquid assets," says Ceretti. "This is particularly enticing for our institutional investors, given the low returns that they are obtaining from fixed income and public equity in this volatile market, and their obligation to pay regular distributions to their subscribers."

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