Alto preps new vehicle as Fund IV deployment nears completion

Min Ho
14 June 2022

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Italian SME investor Alto Partners is preparing to raise a new fund as its fourth vehicle draws close to full deployment, according to a source close to the situation.

Alto Partners will look to raise EUR 200m-300m, surpassing the EUR 210m raised for Alto Capital IV's final close in April 2018, the source said.

The strategy will be broadly the same, targeting Northern Italian companies specialising in design, luxury and clothing, precision mechanics and electromechanics, food, services and specialised distribution, as well as chemicals and pharmaceuticals, they said.

Businesses generating EUR 7m-15m in EBITDA will be the fund's sweet spot, although it can target larger companies through the GP's co-investment capabilities, the source said.

The plans come as the GP eyes full deployment of Fund VI by 2023, they said. Around 80% of the fund's capital has already been spent, with the remaining 20% dry powder to be split evenly between the fund's last platform investment and bolt-on acquisitions for its portfolio companies, they said.

Fund IV has made two exits so far, including CEI Group, a Bologna-based spare parts manufacturer and distributor of spare parts for heavy vehicles, which was announced on June 7, as reported. Prior to this, the fund sold its stake in OFI, a nutraceutical company, in December 2020.

Alto will be fundraising in an "extremely competitive" environment, with technology and green funds taking up increasing attention from LPs both in Italy and abroad, the source said.

The GP pays particular attention to a target's environmental credentials, avoiding companies that are already sitting in sensitive sectors. Companies seeking investments will also have to undergo rigid ESG due diligence. Should they receive investments from Alto, key ESG KPIs will need to be adopted, which will be constantly monitored for improvements, they said.

Alto attracted 70 investors for its fourth fund — 56% of these are institutional investors and 38% are international LPs. LPs include pension funds, bank foundations, banks, family offices, funds-of-funds, and private investors. Around 45% of the capital raised came from non-Italian LPs, founding partner Raffaele de Courten previously told Unquote.