GP Profile: Bregal Freshstream

"We've been busier than I had expected since we've opened our doors," says Patrick Smulders, who co-founded Bregal Freshstream in mid-2015 and is the firm's managing partner. "We've just completed our sixth investment [Euro-Caps] and I would say our investment pace has been slightly ahead of plan."

Smulders founded Freshstream alongside former TowerBrook Capital Partners deal-makers Adam McLain and Rayhan Davis. "Adam, Rayhan and myself left TowerBrook because we wanted to get back to lower-mid-market investing," says Smulders. "That is really where we started at TowerBrook and where I started at Doughty Hanson. At this end of the market, there's competition and efficiency across the market in all the geographies, but we certainly see there is a more interesting dynamic."

When the trio left their respective roles at TowerBrook, explains Smulders, they set out to launch a new firm, yet did not know precisely how they would implement their plan. In its early days Freshstream approached a number of LPs, one of which was Bregal, the private equity arm of the Brenninkmeijer family and an LP in TowerBrook funds.

In addition to acting as a fund-of-funds investor, Bregal also backs fund management teams across a variety of strategies, which operate under its direct investment arm. Following those early discussions, Freshstream became the latest such team, closing its maiden vehicle on €600m in September 2015 with Bregal effectively acting as its sole LP and members of the Freshstream management team also making commitments to the fund.

It is more likely than unlikely that in our second fund we'll also have external investors alongside our anchor LP, which will remain Bregal" – Patrick Smulders, Freshstream

"We had the ability to go independent," says Smulders. "But strategically, for many reasons, we felt it [operating under the Bregal umbrella] made a lot of sense for us. Bregal have deep experience, they are flexible and the partnership gives us long-term horizons – we have the ability to stay with a company for a very long time if necessary. That's very important to us and in a sense we would describe our proposition as fast access to patient capital. It really does resonate with the right people in the right situations and that may be part of the reason we've been investing slightly ahead of plan and why the pipeline looks really exciting."

Freshstream has a generalist remit and primarily targets businesses in the UK and Benelux, though it has recently begun exploring investment opportunities in France, where the firm's senior management team has a track record. In this respect, says Smulders, it is somewhat differentiated from many of its lower-mid-market peers, which are typically less internationally focused. The GP's first six investments include self-service restaurant chain Lunch Garden, based in Belgium; protective coverings business Taziker Industrial, and handbag retailer Radley, both based in the UK; and industrial and petrochemical group Verwater, aircraft leasing business TrueNoord, and ground coffee capsules manufacturer Euro-Caps, which are all based in the Netherlands.

The firm makes investments of between €30-90m, with the ability to remain invested in portfolio companies for longer than the typical private equity holding period of four to six years. This, explains Smulders, enables it to take a medium- to long-term view with regards to growth strategies. Freshstream is also flexible with regards to whether it acquires minority or controlling stakes in businesses and whether it will look to implement organic or buy-and-build approaches.

"Our portfolio to date spans a few sectors, from engineering, to retail, consumer, restaurants and financial services," says Smulders. "There are times in cycles when certain sectors are more interesting than others, and the same applies for geographies. We have no intention to apportion parts of the funds for certain sectors or certain geographies. We're fairly opportunistic on that front, although our focus is on the UK and Benelux."

Exclusivity and future fundraising
Freshstream exclusively takes part in deals where it is afforded relatively extensive periods of time to become familiar with management teams and vendors on a bilateral basis, says Smulders. This, he says, is essential if you are setting out with the intention of working alongside a management team for up to 10 years, or possibly longer. As a result, the firm does not take part in formal auction processes.

"We were speaking to Euro-Caps for more than a year prior to concluding that deal and we've only been in business for a year and a half," he says. "All of our six investments to date have been sourced on a proprietary basis with exclusivity in general of at least two or three months – and in some cases much longer. That feeds into the pipeline; a number of these discussions started a long time ago, and it's about timing, being there and having that relationship with the vendor and the management team when they decide it is the right time to bring in a new majority or minority shareholder."

Though Freshstream's first fund only began deploying capital in December 2015, the firm is already considering what form its successor vehicle might take. While it will continue being backed by Bregal, the GP is also considering spreading its wings somewhat for its second fundraising.

"Whether we will look to raise other funds with additional institutional investors is a discussion that we are commencing," says Smulders. "One of our sister funds, Sagemount in New York, has just done that – in their second fund they have raised external LP commitments, alongside Bregal's investment. I would say it is more likely than unlikely that in our second fund we'll also have external investors alongside our anchor LP, which will remain Bregal."

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Send to  

• Topics
• GPs
• UK / Ireland
• Benelux
• France
• Top story
• In Profile
• United Kingdom
• Bregal Capital