HSBC to back Montagu small cap fund

Following the spin-off of its private equity unit, HSBC is providing a £25m cornerstone commitment to its so-called £125m 'micro-mid cap' fund being launched by Montagu Private Equity.

Montagu Private Equity, the European mid-market private equity firm recently spun out of HSBC, its banking parent, has held a first close of a new fund targeting smaller-scale mid-market opportunities in the UK market.

 

Montagu Capital, the former HSBC Ventures unit set up in 1992, has had a first close on the Montagu Capital Fund, following a £25m cornerstone commitment from HSBC. According to Montagu's CEO Chris Masterson, “Montagu Capital Fund is targeted at the micro-mid cap market, the below-£50m enterprise value businesses that are off the radar for our main fund. The fund is targeted at £125m.”

 

The fund will typically look at UK deals in the £3m to £30m sector, including MBOs, IBOs, buy-ins and development capital situations. It will invest across a broad range of businesses, including manufacturing, services and consumer sectors. Montagu will invest between £1m and £10m in equity per transaction.

 

The Montagu Capital team is led by managing director Andy Leach, who joined the firm from 3i last year. The remainder of the team comprises Martin Green (director), Tom Chaloner (director) and Mahmoud Atalla (investment director).

 

Last week, HSBC Private Equity became the latest captive to separate from its banking parent, following a management buyout of the business led by Chris Masterson. Management have taken an 80 per cent stake in the business, with the bank retaining a near 20 per cent stake. Financial terms for the deal have not been disclosed.

 

Montagu currently manages a E2bn fund that closed in October, half raised from HSBC and half from third party limited partners, which is ten per cent invested. The firm also has another E1bn under management on behalf of HSBC in a legacy portfolio.