Corten closes debut fund on €392m

The fund's target and a hard-cap was initially set at €300m, but the firm raised it with the agreement of investors in response to strong demand. The vehicle is domiciled in Guernsey, though Corten itself is UK-based.

The firm began raising in January 2019, thus avoiding the potential for delays in the current fundraising market. Managing partner Joseph Schull said: "We started our fundraising well before the coronavirus crisis hit, so we'd broken the back of it before any disruption could occur. The major implication of the coronavirus crisis for us is that we don't have a legacy portfolio, so we'll be able to use our fresh capital to make investments through this uncertainty. We also believe that our value proposition to management teams resonates even more powerfully in an environment of uncertainty."

He continued: "Our investors are looking for a focus on longer-term investing, a more hands-on approach and a commitment to value creation through top-line growth and innovation, rather than the focus on cost reductions, financial engineering and short-term gains that have characterised much of the buyout market in recent years."

The firm has a four-person investment committee consisting of founding partners and former Warburg Pincus executives Joseph Schull and Simon Begg, former CEO of Inmarsat Andrew Sukawaty and the chair of the London Stock Exchange Group Don Robert.

Schull said: "While our model wasn't designed for a crisis environment, we think the long-term investment horizon, strategic and operational support and the provision of substantial capital will resonate with management teams now."

Fried Frank provided legal advice, while Acanthus acted as placement agent.

Investors
The fund had seven LPs in total. Schull said: "Many of the generalist buyout funds are now primarily offering a portfolio diversification tool, while the LPs we work with can diversify their own portfolios. What they are primarily looking for is the generation of alpha through more focused, long-term fundamental value creation. This is our approach and we think it has resonated well with our target category of investors."

Corten targeted university endowments and large family offices from North America, Europe and Asia. Schull said: "We set out to find investors who would back us long-term. We are aiming to build strategic relationships with these investors and we value their perspectives from the end-markets to which they have exposure."

Investments
The fund will provide up to €250m to two or three platform companies, with initial investments between €50-150m.

Schull said: "The additional capital that we took over our target will simply enable us to provide more capital and to enable our management teams to pursue a more ambitious growth strategy."

The firm will invest in both Europe and America in B2B services, information and software companies.

"In Europe, there's a rich array of businesses in the niche that we target, which is the space between development capital and leveraged buyouts," Schull said. He expects to have a holding period of seven to eight years for each company.

He said: "We're very focused on our strategy being aligned with our management teams and the companies we back. We don't take directors' fees, transaction fees or monitoring fees, as it misaligns firms from the portfolio companies they back. We also think management teams are becoming increasingly savvy about transparency and how backers make money, and ensuring that this is consistent with long-term value creation for all shareholders."

The firm has developed a pipeline alongside the fundraise and plans to make investments by the end of the year.

People
Corten Capital – Joseph Schull (managing partner); Simon Begg (founding partner).

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