Star Capital closes fourth fund on €140m

The fund was launched in 2018 and held a first close on €65m in August 2018. It is larger than its predecessor, Star III Private Equity Fund, which raised €88m in 2013.

"Our fundraising was smooth and we managed to raise the capital for the final close just before the Covid-19 outbreak erupted," Star Capital partner Marco Baratti told Unquote. "Despite the emergency, we have continued to conduct our meetings and proceeded with our negotiations. Our portfolio companies are all back in operation and have not reported significant damages nor repercussions from the crisis. We are also hiring two more members of staff in the coming months."

Star Capital was advised by MJH Alma in the fund structuring.

Investors
The fund had a high re-up rate of more than 70%. "We have built a large and stable base of loyal investors from our previous vehicle," said Baratti. "In addition, we attracted several new LPs from Italy and the rest of Europe."

The fund's LP base is composed of around 55% Italian investors – primarily institutional players but also 10% family offices – and 45% international LPs from the rest of Europe, primarily large funds-of-funds.

Baratti said: "We have significantly increased the percentage of Italian investors in our new fund, from around 25% in our previous vehicle to approximately 55%. Italian institutional investors have become more interested in alternative products and private equity funds, following low returns recorded by other asset classes and the volatility of the public market."

Investments
The fund targets Italian companies generating EBITDA in the €3-8m range with revenues of €10-50m, and an enterprise value in the €15-35m bracket.

It deploys equity tickets of €10-15m to acquire large majority stakes and uses moderate leverage of less than 3x EBITDA.

The vehicle has a generalist approach but plans to make most of its investments in the industrial and services sectors. It also has a special focus on ESG.

It plans to pursue an intensive buy-and-build strategy with the aim of consolidating the market position of its portfolio companies, and boosting their international expansion.

The fund has already closed one deal, in October 2018, when it acquired tailored clothing manufacturers International Promo Studio (IPS) and Moda Italia from the Marzioni and Santini families. Star Capital deployed €17m in equity, while an €18.3m debt package was provided by Mediocredito Italiano and MPS. The two businesses are now wholly owned by a new company, Holding Star Regeneration, 70% controlled by Star Capital and 30% by the Marzioni family.

The GP told Unquote that Star Capital IV is currently in due diligence for two more deals: a company operating in the services sector and a business active in the hydraulic machinery industry. It expects to close both deals by the end of the year.

"We are confident that we will be able to successfully close these two operations in the coming months," said Baratti. "However, for new deals in the pipeline, we think it is wise to wait until the emergency is resolved and the market has started to recover. The next three to four months will be decisive to understand how the economy is able to react to the crisis and how fast businesses can get back to normal."

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• Topics
• Funds
• Buyout
• Southern Europe
• Italy
• coronavirus