GP Profile: Alantra Private Equity

Founded in 2001 as N+1, Madrid-based Alantra Private Equity rebranded in 2016 to signal the adoption of a global outlook and expansion plan. The firm's activities are split between investment banking and asset management, with operations in private equity, private debt, listed companies and real estate.

Over the past seven years, an acquisitive growth strategy has seen the firm bolt on Mercapital, Brewin and Singer, Catalyst Corporate Finance, Swiss Capital, CW Downer, Landmark Capital and Access Capital Partners. Alantra now has total assets under management of €11bn, a presence in 21 countries and a staff of 400 across Europe, Asia and the Americas.

"Alantra is pursuing a comprehensive strategy on multiple fronts, which will enable the firm to become a pan-European diversified asset manager, adding fund-of-funds, co-investment and secondaries strategies to our established direct investment activities," says partner David Santos.

Nevertheless, the firm's expansion coincides with an increased fundraising effort on the direct investment side. Following the divestment of its second fund, a €500m vehicle raised in 2008 that produced a 2x return for investors, the firm's third vehicle reached a final close on its €450m hard-cap in February 2017 and is now 60% deployed across seven companies.

Alantra is pursuing a comprehensive strategy on multiple fronts, which will enable the firm to become a pan-European diversified asset manager" – David Santos, Alantra Private Equity

"The fundraising for our third vehicle was very positive; we were able to replicate the same pool of capital of the previous fund and, in addition to a successful re-up from previous LPs, we also received commitments from new European institutional investors," says Santos. "More than 50% of Alantra PEF III backers are based [elsewhere] in Europe, while the remainder are Spanish investors. We have a diversified and balanced mix of institutional investors and family offices, insurance companies and funds-of-funds."

The fund's investment strategy is based on three main pillars: targeting local primarily industrial companies with potential for internationalisation; sourcing proprietary deals that do not require an auction process; and acquiring majority stakes of around 55-65%, with the business owners usually retaining a significant minority.

"We look for tailor-made situations where an auction is not suitable for the company and where we can establish a relationship with the owners, which starts long before the deal happens," says Santos. "This approach allows us to get to know the company in depth and ensures we have the same alignment towards the business plan and the future of the company, while obtaining favourable pricing and structuring conditions."

The last investment made by the firm, the acquisition of Frías Nutrición, is a perfect example of this strategic approach, which was adopted in most of the transactions made via Alantra PEF III.

Keeping it simple
In terms of financing structures, Alantra is relatively conservative in its use of leverage. The firm's typical entry multiple is around 8x EBITDA and the average leverage multiple is approximately 2.8x. Furthermore, Alantra prefers not to complicate debt packages, especially considering that its deals are made in partnership with family-owned companies reluctant to accept complex financial engineering.

"There is an abundance of options available nowadays in Spain, from unitranche to combinations of debt and warrants, to private debt funds that offer a variety of instruments. Nevertheless, for our type of deals, which are focused on growth, we mainly use simple structures including senior bank loans combined with working capital facilities," says Santos. "These traditional packages are convenient and versatile, and provide decent amortisation periods and flexibility in terms of adding potential bullet components."

Alantra PEF III invests equity tickets of around €30-60m in companies generating EBITDA of €10-40m and with an EV of €80-200m. "The average EBITDA size so far in our third fund is around €17-18m, which represents our sweet spot and places us in the upper-end of the Spanish mid-market," says Santos.

This is important in a market that has become more competitive and sees an increasing presence of international funds with larger resources and pan-European cross-border scopes. According to ASCRI, in 2018, 77% of the capital invested in the local private equity market came from foreign GPs.

"Despite a larger number of international funds entering the Iberian market and increasing the deployment of capital in Spanish and Portuguese companies, we see this trend as an opportunity more than a threat," says Santos. "On the buy side they look at larger operations and tend to use auctions, while we prefer proprietary and tailor-made deals. On the exit side they represent a great candidate for the acquisitions of our portfolio companies and multiply the available routes that we can pursue once our businesses have grown, reaching EBITDA of €25-30m and expanding internationally."

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

• Topics
• Southern Europe
• GPs
• Top story
• In Profile
• Alantra Private Equity