GP Profile: Suma Capital

Barcelona-headquartered private equity firm Suma Capital is a growth capital investor that targets rapidly growing businesses to accelerate their expansion. The GP invests in lower-mid-market companies across Spain that generate annual revenues in the €10-50m bracket. Suma has a team of 17 professionals, led by founding partner and CEO Enrique Tombas, alongside founding partner David Arroyo and partner Pau Bermudez-Cañete, who lead the growth capital business.

The GP is currently raising its second fund, Suma Capital Growth II, which was launched with a €125m target and held a €65m first close in December 2019. The vehicle targets businesses with high-growth potential that are ESG-focused, operating in the niche manufacturing, specialised retail, business process outsourcing and e-commerce sectors. It deploys equity tickets of around €10m and acquires majority stakes of 51-55%, or minority stakes of no less than 25%.

Suma told Unquote that it expects to hold a second close in the summer and slightly delay its final close in order to attract additional capital from international LPs and institutional investors, which have been a bit more reluctant in committing capital to the country than local LPs. "Our fundraising is proceeding well despite the crisis, and we have recently received additional commitments from some Spanish and international LPs," says Bermudez-Cañete.

Suma Capital Growth II received commitments from all the LPs in the previous vehicle, including the European Investment Fund (EIF), Institut Català de Finances (ICF) and around 20 Spanish family offices. In addition, British asset manager Aberdeen Standard Investments and a Luxembourg-based fund-of-funds committed capital to the vehicle, while a French family office joined the investor base a few weeks ago, the GP told Unquote.

Suma intends to attract additional European family offices in the coming months, which are expected to contribute around a third of total commitments. The remainder will be composed of public and private institutional investors.

"While the investor base in our debut fund was almost entirely Spanish, this second vehicle will comprise around 50% international LPs," says Bermudez-Cañete.

The fund has inked two deals so far. The first was the acquisition of a 55% stake in Bilbao-based business education provider Implika in December 2019. Suma backed the company alongside a Spanish family office, which took 5%, while the company's founder and chair Zigor Maritxalar retained the remaining minority stake. The GP invested an equity ticket of just less than €10m via the purchase of shares from a minority shareholder and a capital increase.

For other, more recent and new processes, we have put our due diligence on hold when the sector was badly hit by the crisis or have renegotiated new conditions to guarantee better terms to our investors" – Pau Bermudez-Cañete, Suma Capital

The fund has recently signed its second deal: the investment in Barcelona-based Nice People At Work (NPAW), a specialist in online video analytics. The GP acquired a stake of around 25% in the company with a ticket slightly in excess of €10m.

"We started negotiations to buy this fast-growing company last year," says Bermudez-Cañete. "We are confident that NPAW will continue to grow and double its revenues by 2023. We also plan to accelerate its expansion through a buy-and-build strategy and already have three add-ons in the pipeline. The technology sector has been performing very well despite the coronavirus crisis and we expect a further improvement in the coming months."

Proceed with caution
The GP has taken a different approach for newer opportunities, says Bermudez-Cañete: "For other, more recent and new processes, we have put our due diligence on hold when the sector was badly hit by the crisis, or have renegotiated new conditions to guarantee better terms to our investors. It is important to be cautious at this stage and look for truly resilient companies. At the same time, this can be a time of great opportunity for a growth capital fund like Suma and we are very optimistic."

Suma is also managing the portfolio of its debut fund, Suma Capital Growth Fund I, which is currently around 90% deployed. The fund raised €50m in 2015 and is fully invested, performing at 2.4x.

"Four fifths of the value of Suma Capital Growth Fund I is doing well," says Bermudez-Cañete. "All our companies are operating as usual except for two businesses in the retail and travel sectors, which had to stop their activity. All of them, including these two, have strong balance sheets, not much leverage and sufficient liquidity to face the challenges and find the necessary oxygen to recover and continue to expand after the crisis."

The portfolio of Suma Capital Growth Fund I is composed of seven companies. It includes online sport clothing and accessories retailer Tradeinn, which generated turnover of around €188m in 2019. Suma acquired a 30% stake in the company in November 2015. "Tradeinn generated a 40% revenue increase in 2019 and has grown amid the pandemic even more than we expected," said Bermudez-Cañete.

The fund's portfolio also comprises aluminium bottle manufacturer Alucan, which was acquired in 2016 and generated revenues of €35m in 2019, 70% of which came from outside Spain. The company plans to open a second factory in Belgium early next year.

The fund also invested in artisanal baked goods producer Turris by acquiring a 65% stake in 2017; marketing specialist Caher in 2018; Germans Homs, which specialises in renting out equipment to the construction and industrial sectors; travel agency GrandVoyage, which has suffered because of the pandemic but is now restarting its operations; and party costume and accessories retailer Party Fiesta, which was also affected by the outbreak but is reopening its stores.

This is not the ideal environment for performing a successful exit – we can take our time and wait until the emergency has resolved and the market goes back to normality" – Pau Bermudez-Cañete, Suma Capital

"We are currently working on three add-ons for three of our first fund's portfolio companies," said Bermudez-Cañete. "On the exit side, we intend to wait until next year. This is not the ideal environment for performing a successful exit – we can take our time and wait until the emergency has resolved and the market goes back to normality."

The GP also manages two infrastructure funds: Suma Capital Energy Efficiency Funds I, which is currently fully deployed; and Suma Capital Energy Efficiency Fund II, which closed on €150m in 2018 and has already deployed more than 50% of its capital. "This is really a good time for sustainability and energy efficiency, and our infrastructure strategy is performing extremely well," says Bermudez-Cañete.

Suma was one of the first Spanish private equity firms to be a signatory member of the United Nations' Principles for Responsible Investment in 2013, with a current UN rating of A+. The firm was awarded the Spanish Private Equity Association's Environmental, Social and Governance prize in 2019.

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