Portobello Structured Partnership holds EUR 250m final close

Víctor Virós, director at Portobello Capital, told Unquote that the fund was launched towards the end of 2019.

The new fund is a natural extension of Portobello's mid-market, Southern European LBO strategy, but allows the GP to take advantage of different opportunities, Virós said. "What Portobello identified over the past few years is that there were a lot of companies that were interesting from an investment standpoint, but they were not "for sale" – they were not selling a majority stake, although in many cases they still wanted capital and could benefit from an institutional partner."

Virós joined Portobello in 2019, prior to the launch of the Strategic Partnership fund. He has previous experience with Tensile Capital Management and McKinsey & Co. Virós will lead the fund alongside partner Carlos Dolz de Espejo.

The latest vehicle in the GP's existing LBO strategy held a final close in December 2017 on EUR 600m, surpassing its EUR 500m target. The GP also raised a EUR 350m fund in 2020 to promote the growth of fish specialist Angulas Aguinaga and ready-to-eat meal producer Industrias Alimentarias de Navarra (IAN), including via add-ons.

Investors
The Spanish arm of Credit Agricole's wealth management business has backed the vehicle, committing EUR 40m via one of the fund's three sub-vehicles. Institutional investors such as pension funds, funds-of-funds, insurance companies, banks, family offices and sovereign wealth funds have also backed the vehicle, according to Virós.

Portobello typically gets 75%-80% of its capital from international investors, but there is a more even split in the Partnership fund, Virós said.

Investments
Portobello Strategic Partnership I will take minority stakes in the same type of companies as the GP's flagship LBO strategy, Virós said; namely, Southern European mid-market companies with EBITDA of EUR 10m-EUR 50m in the industrials, healthcare, technology, consumer and services sectors.

The fund will take minority stakes starting at around 15% but will not own more than 50% of a company's voting and governance rights, Virós said. The fund will deploy tickets of EUR 20m-EUR 50m, according to Unquote Data.

"The strategy of the fund is to do everything that the LBO funds can't do," Virós said. "We will do minority deals where we have the ability to buy common equity or design bespoke securities, such as preferred equity, convertible equity, or a combinations of different instrument, depending on the situation."

Although the fund will provide flexible equity instruments, it will not make investments in the form of debt, according to Virós.
The fund made its first deal in July 2020, investing in chemical testing laboratory business AGQ Labs. Just over a year later, the fund backed food retailer Condis.

Asked about the fund's deal pipeline, Virós said that the fund is seeing strong dealflow given that there are few sponsors operating with a similar strategy in the region. "This is an investment strategy that is more developed in northern Europe and the US, but this is a newer strategy and solution in Southern Europe, so we are seeing a strong pipeline of opportunities due to this, with many companies that are interesting from an investment point of view."

The fund will benefit from the fact that its deal sourcing process will be complementary to that of the LBO strategy, according to Virós. "We are sourcing within the same types and sizes of businesses, but we are now meeting them with two options, whereas in the past we only had one," Virós told Unquote. "We have a deep and strong network that we have built over the years, but over the past two years, we have been spending a lot of time educating the market, explaining what we can do and the types of situations where this strategy is a great fit. This has seeded a lot of the pipeline we are seeing now."

Portobello is open to working with advisers and establishing new relationships to develop dealflow, Virós said.

The vehicle expects to make seven to nine deals in total and is currently around 25%-30% deployed, Virós said. The fund will have a 10+1+1 lifespan, with five years for investment and five years for divestment.

People
Portobello Capital – Victor Virós (director); Carlos Dolz de Espejo (partner).

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