Italian fundraising processes disrupted by Covid-19 crisis

Alessia Argentieri
14 April 2020

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The Covid-19 outbreak is likely to cause delays and postponements for most vehicles across the country, although a handful of managers have also launched new vehicles in recent weeks. Alessia Argentieri reports

Italian GPs on the trail are struggling to maintain the fast pace of 2019, when buyout and generalist vehicles raised €6.8bn. LPs are becoming more anxious and reluctant to becoming over-exposed to the country, and coronavirus fears are expected to slow down fundraising during at least the next six months.

Several private equity firms ready to come back to the market with a new product are instead choosing to postpone the launch of their funds, including Consilium Private Equity and Green Arrow Capital, among others.

Consilium is delaying the launch of its new buyout fund, Consilium IV, according to a source familiar with the situation. The vehicle intends to make 10 or 11 investments in Italian companies with enterprise values in the €40-80m bracket, generating EBITDA of €5-20m. It will target majority stakes and will deploy equity tickets in the €15-30m range, but will also be open to co-investments with LPs for larger transactions. The fund will be sector-agnostic, but with a focus on buy-and-builds in food, automotive and consumer goods.

Green Arrow is postponing the launch of its fourth fund, Green Arrow Private Equity Fund 4 – initially expected in Q1 2020 – according to a source familiar with the situation. The vehicle will have a €350m target and €400m hard-cap. It will invest in majority and controlling positions in Italian companies with EVs of up to €150m and EBITDA in excess of €7m.

Green Arrow 4 will deploy equity tickets in the range of €10-60m and target businesses operating in the fashion, industrial engineering and technology sectors. The GP plans to raise capital primarily from Italian and European institutional investors and expects most of the LPs from its previous funds to re-up to this new vehicle.

Delays expected
Other Italian funds already on the market are postponing their final closings to Q3 2020 or further, depending on how quickly the emergency is resolved and how badly the aftermath of the crisis hits the country.

One such example is Quadrivio, which is raising two sector-focused funds, Made in Italy and Industry 4.0. Made in Italy is dedicated to the fashion, design, beauty and food industries, and deploys equity tickets in the €10-15m range. The fund was launched in January 2018, held a first close on €100m in March 2018 and a second close on €150m in December 2019. It was planning to hold a final close in April 2020, surpassing its initial target of €200m and reaching €250m.

The GP told Unquote that the fund is postponing its final close by a couple of months, but is also considering increasing the target to €300m. "We expect more capital to pour in once the crisis is resolved," said the GP.

Industry 4.0 was launched with a €300m target and held a €100m first close in October 2018. Its final close, which was expected in the first half of 2020, has been postponed to the end of this year or the beginning of 2021, the GP told Unquote.

The fund invests in SMEs operating in the manufacturing industry, with high potential to grow further via digitalisation and automation, and able to generate annual revenues between €50-150m. The companies targeted by the vehicle are mainly based in Italy, but 25% of the fund's capital can be deployed abroad.

Mandarin Capital is also raising its third vehicle, Mandarin Capital Partners III (MCP III). The fund was launched with a €250m target and a €300m hard-cap, and has raised €175m so far. It will have to postpone its final close, expected in July 2020, by at least six months, the GP told Unquote.

The fund targets businesses with enterprise values in the €30-70m range and EBITDA of €3-7m, operating in a wide array of sectors, including mechanical engineering, chemicals, cosmetics and food. It invests primarily in Italy, but can also deploy a portion of its capital in Swiss and German businesses.

MCP III provides initial equity tickets of €15-20m and follow-up capital injections of up to €30m per portfolio company to finance their expansion and buy-and-build strategy. The fund has made two platform deals so far: coffee capsules producer Neronobile and luxury bags manufacturer Eurmoda. The GP told Unquote that it plans to close two additional deals in the coming months, one in Germany and one in Italy, but had to slow down the deal-making process.

Aksìa Group has also postponed the final close of its fifth fund, Aksìa Capital V, which was launched in February 2019 with a €200m target and held a €100m first close in July 2019. The fund targets European businesses with potential for high growth, buy-and-build and international expansion, and deploys equity tickets in the €15-25m bracket.

"The fundraising has been very smooth for our fifth fund," the GP told Unquote. "We have raised commitments of €120m so far and will reach €150-160m after the summer. However, we think it might be beneficial to postpone the final closing, which was scheduled for the end of 2020, by around six months."

DeA Capital is raising its second agri-food-dedicated buyout fund, Taste of Italy 2. The vehicle was launched in October 2019 with a €250m target and €300m hard-cap. Unquote understands that the GP is on track with its fundraising and expects to hold a final close by the end of 2020 or in Q1 2021.

Braving the storm
Despite the prediction of an imminent recession, some new vehicles have been launched in the midst of the crisis, benefiting from the support of the Italian state.

Friulia Veneto Sviluppo (FVS) has launched a €75m private equity vehicle, Fondo Sviluppo PMI II, with a €20m commitment from Veneto Sviluppo, the investment vehicle of the Veneto region.

Furthermore, debt and restructuring funds are gaining momentum, and several vehicles have been launched in the last few weeks to support the recovery of Italian companies hit by the coronavirus emergency.

Among others, Main Capital launched UTP Restructuring Corporate Fund, dedicated to bank credits with a special focus on unlikely-to-pay (UTP) exposures.

Meanwhile, Muzinich-backed Springrowth plans to launch a Rescue Financing Fund with a €200m target by the end of the year, to support Italian companies in distress and help them recover during the aftermath of the coronavirus outbreak. The GP has also recently closed its first debt fund, Fondo di Credito Diversificato per le Imprese, on €417m.

Riello Investimenti has announced the launch of a €150m private debt fund, Impresa Italia Private Debt II, which targets Italian mid-market companies and specialises in providing senior and junior loans, residual equity instruments and convertible bonds.

Equita Capital is raising Equita Private Debt II with a €200m target and plans to hold a final close by the end of 2020, while Quaestio European Private Debt is expected to hit its target in the coming months.