Kyma Partners holds EUR 100m first close for debut fund

The vehicle has a EUR 130m target. K&L Gates provided legal advice on the fundraise through a team led by Giovanni Meschia.

Asked about the timeline of the fundraise, Gianluca Losi, partner and CEO at Kyma Investment Partners, told Unquote: "We devised our strategy a couple of years ago, then when Covid-19 started, we began the authorisation process for our fund with the Bank of Italy. We were authorised in November 2020 and since then we have formally started fundraising. Our EUR 100m first close is well above the target we had of EUR 60m-80m."

The first close did not come without its challenges, given that the GP was raising a debut fund during a time of very limited international travel. "It has of course been tough for a first-time fund and a first-time team, and not being able to meet LPs in person – doing meetings by Teams or Zoom has been more complicated and less effective," Losi said. "But our thesis and strategy, combined with a good deal pipeline, meant we were able to go in the right direction."

Losi added that the impact of the Covid-19 pandemic has revealed Italy's need of digitalisation and, in particular, the need for the digitalisation of SMEs.

The Milan-based GP announced its official launch in November 2020. The firm was established by four partners: chairman Luciano Hassan, former head of Intesa San Paolo Private Equity and senior advisor at Alpha Private Equity; Gianluca Losi, who was previously a partner at Mediobanca's TEC and a director at Alpha Private Equity; Michele Fontana Sabatini, who has prior experience with KKR Pillarstone and Bregal; and Carlo Privitera, who has prior experience as an operating partner with Investindustrial in New York, as well as eyewear company Luxottica.

In addition to its first close, the GP has announced the acquisition of a 70% stake in Datlas, a business that assists companies with their digital transformation via its data validation and integration platform, which is based on robotic process automation (RPA) software. Datlas's management team are reinvesting alongside Kyma. The company expects to post revenues of EUR 12m in 2021 (an increase of 30% versus the previous year) alongside EBITDA of EUR 1.8m.

Gattai Minoli & Partners provided legal advice to Kyma on the acquisition, while Deloitte provided financial due diligence and tax services. Datlas and its shareholders were assisted by law firms NCTM and Nunziante Magrone.

Investors
Fondo Italiano d'Investimento and the European Investment fund (EIF) are the fund's cornerstone investors. The fund is also backed by high-net-worth individuals and family offices.

Although the majority of LPs in the fund are currently Italian, Kyma expects to attract LPs from abroad for the final close, Losi told Unquote: "We have been solicited by a number of LPs from abroad who have shown a high level of interest in the strategy that we have for the Italian market. So we expect a higher number of foreign LPs to join between now and the final close, as our due diligence and meetings pipeline is very busy."

Investments
The fund will invest in Italy-based SMEs via buyouts and growth capital injections. The vehicle focuses on companies with EBITDA of EUR 3m-7m and revenues of EUR 10m-60m, targeting businesses undergoing a digital transformation of their business model. The fund will make equity investments of EUR 10m-20m per company, focusing on B2B industrial services and B2C companies in sectors including technology and education.

"We typically invest in majority deals, whereby founders will reinvest a portion into the deal for a minority stake, as we have done in Datlas," Losi told Unquote. "Deals where we are in a one-to-one conversation and primary transactions are our preferred route, but we also envisage SBOs, depending on the case."

The fund expects to make eight or nine deals in total, with two further deals to come in the next 12 months, including one in the education sector. The vehicle expects to make around two deals per year and will be fully deployed in three to four years, Losi told Unquote.

"We have some interesting opportunities in the agritech space that we are working on, " Losi said. "We also focus on education, where our team has invested in the past. We are specifically targeting K12 assets [primary and secondary schools], which are very interesting for us due to market dynamics and competition."

Both the impact of and the recovery from the Covid-19 pandemic in Italy have presented opportunities for Kyma. "We are seeing opportunities arising from the post-pandemic effect: in food, agritech and education, we have a gap in Italy compared with other European companies when it comes to digitalisation, so there is a real need for a catch-up," said Losi. "On the other hand, Italy's recovery fund has allocated significant resources to pushing the digitalisation of these industries, which opens opportunities for businesses and for PE to consolidate."

In addition to digitalisation, buy-and-build strategies will form a key part of Kyma's investment strategy and value creation plans. "The main platform will always be Italian but the buy-and-build strategy can be either in Italy or Europe," said Losi. "We have a disciplined and structured approach: we devise an M&A profile that fits with our main platform, then we look for the assets. So it's not driven by market opportunities, but by what means our asset can add strategic value. We will talk with our founders, who typically have their own network, as well as our own M&A and legal advisers. We are open to whatever the source is for originating opportunities and adding value."

People
Kyma Investment Partners – Luciano Hassan (chairman, partner); Gianluca Losi (partner, CEO); Carlo Privitera (digital and operations partner); Michele Fontana Sabatini (partner); Andrea Rangone, Stefano Mainetti (business partners).

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