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Investindustrial nears €100m close on LP-friendly annex fund

The Southern European buy-and-build specialist is giving LPs greater control over investments made by the fund, which will support add-ons for Fund III portfolio companies.

Investindustrial has nearly hit its €100 million target for an annex fund, according to sources familiar with the situation.

The fund, which one investor said may raise as much as €120 million, would provide capital for bolt-on deals to companies in the firm’s Fund III, which closed on €500 million in 2005. It is not meant to provide rescue financing for distressed companies, as may be the case with other annex funds currently being marketed, said another source. 

The firm declined to comment.

Marketed to LPs with no carry or other fees, the fund includes a “significant GP contribution” and also has an “innovative” approach that gives LPs greater transparency and power as regards the fund’s investment decisions. While the precise details remain unclear, a source said the fund is structured so that GPs and LPs are “working together as partners”, giving LPs the power to vote against transactions, as opposed to the typical GP-LP relationship that entrusts GPs to make all investment decisions.

The structure is sure to be scrutinised by peers, as many investment funds increasingly run up against the need to give further support to portfolio companies.

The biggest issue for private equity, to my mind, going forward will be a lack of reserves in existing funds.

Tom Anthofer

“The biggest issue for private equity, to my mind, going forward will be a lack of reserves in existing funds,” Tom Anthofer, managing partner of direct secondaries firm Cipio Partners, recently told sister publication Private Equity International.

“Now post-Lehman, that’s a huge issue for both the older, fully invested funds as well as those that are just half-way through their investment period,” he said. “These funds no longer face only a J-curve but, in effect, are now up against a W-curve. By early 2008, many funds had ‘climbed up’ into profit, albeit with most assets unrealised. The crisis basically reset all that, and they will need to start all over again, which means companies may have another five to six years before they will be realised and, on the way there, they will be screaming for more money.”

That goes for venture-backed companies that aren’t cash-flow positive, as well as buyout-backed companies needing debt refinancing and equity cures, he added.

Investindustrial is one of Southern Europe's oldest buyout firms. It was founded in 1990 and targets companies in Italy, Spain and Portugal across the full range of the mid-market. It raised its latest buyout fund last year, closing on €1 billion in December after just three months in the market.