GP Profile: Stirling Square Capital Partners

Stirling Square Capital Partners has been on the private equity scene since 2001, when it was founded off the back of a $250m seed investment from Citibank's balance sheet. Following the financial crisis and the introduction of the Volcker rule – which put investment restrictions on banks – Citi Capital advisers pulled back and sold their stakes in the GP's funds. In a series of secondary trades, investors such as Schroder Adveq, Access Capital Partners and StepStone bought the stakes, upping their exposure to the firm, according to Unquote Data.

The PE house's second fund, a 2008 vintage vehicle, closed on €375m. It held a final close on €600m for its third fund in 2016, €100m over its target of €500m. Although the firm declined to comment on current or future fundraising, it is understood that Stirling Square's fourth fund held a first close on €600m in May 2018 against its target of €800m with a hard-cap of €1bn, according to reports.

The GP commitment in Stirling Square's third fund was 7.5%, and head of investor relations Pascal Monteiro de Barros expects to exceed that proportion for its fourth effort.

Click here to view a complete profile of Stirling Square, including a comprehensive list of LPs and their individual commitments, as well as up-to-date portfolios, on Unquote Data

The GP has a team of 17 investment professionals of various nationalities, all of whom are based at the Stirling Square office in London. "We chose to invest from one office, and it works for us from a sourcing and execution perspective, but you have to have an incredibly international team," says Monteiro de Barros.

Indeed, the team pursues a pan-European strategy, deploying to date funds in 25 platform investments across 12 European countries.

The firm's debut fund has now been fully realised. It has made three exits from its second fund and one from its third fund, resulting in an average return of more than 3x money across 11 realisations to date. Stirling Square achieved strong returns on its two most recent sales: speciality logistics firm Cartonplast (second fund) was sold to Deutsche Beteiligungs for a rumoured 3.2x money in August 2019; and French holiday villages operator Siblu (third fund) was sold to Naxicap for 3x money and 30% IRR in September 2019, Unquote understands.

While the firm looks at companies with enterprise vales of €50-500m, the core focus is on companies valued at €100-300m with an average entry EV around €150m.

"At that size we are able to target family-owned, niche industrial companies, resulting in a high number of primary deals," says Monteiro de Barros, adding that more than 50% of the firm's deals have been proprietary and more than 60% have been primary transactions involving assets acquired directly from family owners.

The firm says it has achieved an average entry multiple of 7x EBITDA across its funds, with the most recent fund deployed at an average entry multiple of 7.7x.

Co-investing roots
Stirling Square has offered nearly €350m in co-investments to its LPs since inception, with deals including Docu Nordic, Siblu Villages and the National Fostering Agency.

"Because of the way we were set up by Citibank in our first investment series, through annual tranches of capital, we have offered significant co-investment to LPs since day one," says Monteiro de Barros.

And while the firm is dedicated to investing in companies in its sweet spot, buy-and-build is an important aspect of the growth strategy for much of the portfolio. "Having available co-investment capital enhances our ability to make significant and transformational add-ons while strengthening our relationships with investors," Monteiro de Barros says.

In terms of growth, the firm has increased the size of its funds, though not as dramatically as some of its competitors. But the decision to grow in a measured fashion was a conscious one, says Monteiro de Barros, as it means the investment professionals can continue to target businesses within their target €100-300m EV range rather than shift their strategy to focus on a larger, more competitive part of the market. Monteiro de Barros adds that he expects his funds to do more, rather than larger, deals as they grow, and is targeting 10-12 assets in the fourth fund, versus nine in the third fund.

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