GP Profile: Capza

Established in 2004 by founding partner Christophe Karvelis Senn, Capza (previously known as Capzanine) is a European private investment platform with a focus on small- and mid-cap companies. The firm manages €5bn in assets across six complementary strategies: flex equity, private debt, growth tech, expansion, transition, and senior loans (via its Artemid funds).

Since inception, the firm has invested in 239 companies, targeting a variety of sectors and geographies. In the last five years, Capza has expanded across Europe, opening offices in Madrid, Munich and, most recently, Milan.

"We established Capza with a focus on flexible equity and subsequently expanded its scope to new asset classes and products suitable for the mid-market," Karvelis Senn tells Unquote. The firm is striving for agility, flexibility and diversification, he says: "We build portfolios with more lines than most GPs, and this allows us to reach a wider degree of diversification across sectors and countries within our vehicles. Furthermore, we provide a combination of instruments and strategies able to respond to the different needs, growth ambitions and business plans of our target companies."

The GP is currently investing its Capza 5 Flex Equity fund, which has a €500m target and €700m hard-cap. It has raised €450m so far, exceeding the size of its predecessor, which closed on €350m in October 2016. The GP expects to hold a final close surpassing the fund target in the coming weeks.

Flex Equity 5 has built an investor base composed of institutional investors and around 20-25% of high-net-worth individuals and family offices. Approximately 65% of the LPs in Capza's funds are French, while the remainder come from the rest of Europe, the US and Asia. Its LP base includes the European Investment Fund, BPI France, Axa, German fund-of-funds Golding, and BNP Paribas, among others.

"We have a strong core of French LPs, but we also plan to further expand and diversify our investor base in the coming years, with the addition of new international LPs from outside of France," says Karvelis Senn.

Flex Equity 5 provides flexible financing that combines majority and minority capital, convertible bonds, and mezzanine, offering tailor-made packages adapted to the companies' projects. The vehicle supports mid-cap businesses based in France, Spain, Germany and Italy with EBITDA of €4-12m and turnovers of up to €150m.

The fund plans to complete 20-25 investments over a five-year investment period. Around 70-75% of the capital should be deployed as mezzanine, with the remainder invested as equity. "We employ a hybrid model that allows us to be very agile and dynamic, selecting both majority and minority positions and deploying different combinations of equity and debt instruments, a strategy that guarantees an interesting risk-return profile for our investors," says Karvelis Senn.

The fund started to invest last September and has already backed four companies: digital education provider IMF Business School; education group Ynov; digital transformation specialist Magellan Partners; and Winncare, a manufacturer of medical beds. It expects to ink a fifth deal in the coming weeks.

The array of funds managed by Capza also comprises a €190m vehicle, Capza Transition Fund, which is currently invested in three companies: patisserie specialist Groupe Saint Aubin; coffee producer Legal; and German manufacturing machinery installer Proxes. Two new deals for this fund are expected soon.

Karvelis Senn says: "The fund invests in performing companies that need to have a reinforcement of their balance sheets through bonds or equity. It had a slow start following the pandemic outbreak, because the government has been supporting many businesses with state-guaranteed loans. However, dealflow has accelerated in H2 2020 and has now sped up. We are currently working on two interesting deals, which might be completed in the next month."

Fundraising flurry
Capza is raising the fifth generation of its private debt strategy, Capza 5 Private Debt, which has a target of €1.5bn. The GP told Unquote that the fund has surpassed its target and is reaching a final close, which will probably be held by the end of April.

The vehicle invests in companies with EBITDA of more than €12m, providing LBO financing, including unitranche, senior loan and mezzanine. It plans to deploy around 50% of its capital in France and the remainder in the rest of Europe, primarily Spain and Germany.

Capza 5 Private Debt has been investing since July 2019 and is currently more than 60% deployed. The GP told Unquote that, following the success of this fund, it expects to start fundraising for a sixth private-debt vehicle by the end of 2021.

In addition, Capza has recently launched a new strategy: a growth tech fund with a €250-300m target, which deploys tickets between €10-30m, providing growth equity and quasi-equity. Capza told Unquote that the vehicle has collected €140m so far and expects to hold a final close in April-May.

The launch of this new fund followed the acquisition of Time for Growth, an investment company specialised in growth investments in technology companies, integrated within Capza in September 2020.

Capza Growth Tech Fund targets profitable businesses with EBITDA of less than €5m and a sustainable level of sales. It takes minority positions alongside managers and founders, with the aim of fuelling the development of companies operating in a wide range of segments across the technology industry.

"We decided to apply our expertise in the tech industry to the launch of a new strategy dedicated to helping small businesses scale up commercially and strategically, and further expand internationally," says Karvelis Senn. "Many of these businesses need both capital and professional support in order to reach a critical size.

"With our Growth Tech Fund, we invest across all tech verticals, with a special focus on software and cybersecurity. These two segments have grown exponentially after the global shift to remote working and virtual networking caused by the pandemic, and are forecast to become even more predominant across the world economy in the coming years. They represent an unmissable opportunity for private equity investors, and we plan to expand our exposure to these promising sectors."

Capza has already started to build the fund's portfolio by acquiring French financial ESG measurement software developer Sirsa in December 2020. The company was bought via a special vehicle and will be transferred to the fund as soon as it reaches its first closing. In the meantime, Capza is also working on a second deal for the fund. Negotiations have reached the exclusivity stage and the deal is expected to close by mid-April.

Furthermore, Capza is investing Artemid III, a senior financing vehicle for small and medium-sized companies, deploying tickets in the €10-25m range. The fund was launched with a €450m target and has raised €400m so far.

Karvelis Senn says: "This product is targeted specifically for institutional investors and especially insurance companies, given that it offers lower returns than other products we provide, but guarantees a good risk-return in cash."

Capza is also managing a €500m vehicle named Capza Expansion Fund, which is entirely financed by Axa France. The fund targets investments in French mid-cap companies to support their relaunch and expansion in the aftermath of the pandemic. It invests tickets of at least €15m per transaction, following a tailor-made approach, which combines investments in equity, quasi-equity and a range of non-dilutive financial instruments.

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