GP Profile: Quilvest eyes lower mid-market niches as direct PE strategy grows

The firm is aiming to implement its strategy in the current market without making any significant changes, Vatier said. “As thematic investors, we are focused on identifying companies with long-term, resilient growth, underpinned by global megatrends,” he said. “We will be more careful in the current macro environment, but we will remain disciplined and continue doing what we know we’re good at.”

Thomas Vatier, Quilvest Capital Partners

These areas include business services and technology, Vatier said, adding that the consumer sector remains on its radar. It will target education, multi-unit roll-out concepts and digital native consumer brands within this market, he said. “We are being cautious in terms of what is ahead, but the portfolio is performing well,” he added.

The GP currently has 12 portfolio companies spanning Europe and the US. These include Belgium-based chemical developer and manufacturer Minafin, as well as France-based connected device assembly specialist Solem.

Quilvest’s direct private equity strategy focuses on the lower mid-market in North America and Europe, targeting businesses with EBITDA of USD 5m-USD 30m and typically taking majority stakes. The strategy typically makes two to three deals per year, typically deploying USD 100m.

Vatier does not expect the next year to differ significantly from previous years in terms of deployment. “People are seeing less volume in the market, but there are still a good number of high-quality deals for the businesses that we focus on,” he said.

Branching out
Quilvest Capital Partners has USD 7bn AUM across four strategies: real estate, private debt, private equity funds and co-investments, and direct private equity. The latter is “more nascent” than the firm’s other strategies, according to Takefman, although the firm began investing in PE funds in earnest in the 1970s.

Quilvest initially invested on behalf of the Argentinian Bemberg family, but it now has an LP base comprised of global institutional investors, including pension funds, insurance companies and family offices.

The GP’s latest direct fund, Club Fund II, amassed USD 400m in commitments and was raised in 2019. The vehicle has a four-year investment period. “We did SPVs early on, but we had enough success to raise traditional funds, and we have diversified our LP base globally,” Takefman said. The firm raised around USD 300m for Club Fund I in 2016, he said, deploying its capital over three years.

The GP is expecting LP appetite for its strategy to remain strong, Takefman said, with any potential LPs able to take note of its track record in identifying interesting investment opportunities, including over the past year. “We have done this by staying true to what we know and by being selective in finding companies with resilient business models,” he said. “Although our starting point of USD 5m EBITDA is small, particularly in the US, growing these businesses and taking market share is still an option during slower times. We can find outsized growth in these niches with businesses that can navigate the current market more than their larger competitors.”

Family roots
While it now makes deals on behalf of a broader investor base, the firm’s family office history and international approach allow it to engage successfully with family-backed businesses. This sets the firm apart from other PE players operating in the same market, according to Takefman.

“We are often the preferred partner for family-owned businesses as we understand their legacy,” he said. “We are looking to support lasting growth, but not necessarily to change their management, which mitigates some of the concerns that people have about PE. We have a track record of taking family-owned businesses to the next level, expanding them globally and then selling them to larger PE.”

Such exits include the sale of UK-based recruitment services firm Phaidon International to a consortium led by Further Global Capital in July 2022. The deal saw the company retain a significant minority stake and came around four years after the firm backed the buyout of the business in 2018. In May 2022, Quilvest sold its stake in higher education business Groupe EDH to Five Arrows Principal Investments, following which it reinvested in the company alongside fellow existing investor IK Partners.

The firm implements leverage of less than 3x on average, Takefman said, noting that this decision is about more than just taking a careful approach. “We are often backing management teams who have never had institutional leverage in a traditional buyout, and we’re helping them with tasks such as reporting, hiring CFOs, and enterprise resource planning,” he said. “We are not financial engineers,” Takefman said, adding that the firm focuses on partnering with innovative management teams to support them during their next stage of growth.

Implementing ESG
The GP’s approach to ESG is also shaped by its family background, Takefman said, with the “entire ethos” of its founding family rooted in being ethical and living up to the highest moral standards and values, he said. “This has always been a part of our approach but it’s now more important than ever and we have to document it appropriately for our LPs,” he added.

The firm will be aiming to have its future programmes classified as Article 8, Vatier told Unquote. “We incorporate ESG throughout the investment cycle and develop bespoke ESG action plans for our portfolio companies,” he said. “We also do third-party ESG due diligence, which we discuss at IC level and management, and we discuss our progress every quarter.”

Quilvest Capital Partners was formed in 1972. The firm's direct private equity team spans its offices, with Takefman based in New York and Vatier in Paris, and 15 of the firm's 100 investment professionals working on the strategy.

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