Investors pull plug on Magenta Investimenti

Italian mid-market firm Magenta Investimenti has closed its doors after investors decided to liquidate the fund once the key man clause was triggered.

Investors in Italian mid-market firm Magenta Investimenti have taken the almost unprecedented step of pulling the plug on the firm after co-founder Edoardo Lanzavecchia’s revealed his intention to leave, triggering the key man clause.

This standard investor protection allows investors to dissolve a fund if a senior executive leaves or becomes incapacitated.  An investor familiar with the decision said a legal complexity meant the decision to dissolve the fund effectively meant an end to the firm too.

Lanzavecchia, who was formerly a managing director at The Carlyle Group in its Milan office, started Magenta two years ago alongside Luciano Balbo and Luigi Sala, both from BS Private Equity, where they were managing partners.

The trio raised a €500 million ($690 million) fund to invest in companies with revenues of between €250 million and €300 million.

Another investor in the fund says cracks in Lanzavecchia’s relationship with his partners began to emerge after the firm agreed to a co-investment deal with the French mid-market firm Alpha, which is active in France and Germany.

He said: “The firm’s demise is about a clash of personalities and divided loyalties, mixed with some Latin volatility. They have decided to go their separate ways.”

Investors contacted by PEO were disappointed by the firm’s collapse. But one said the firm’s single largest investment in CIFA, a ready-mix concrete equipment manufacturer, accounting for most of the invested capital from the fund, would be a consolation. 

He said: “It is up for sale and promises a really good multiple. They had invested about a third of the fund. Investors will get their money out and book a profit. Now we just want to move on, but it is not because the portfolio looks bad.”

Mounir Guen, chief executive of MVision, whose firm placed the fund with investors said: “One of our main concerns has been to ensure that investors’ interests were protected under such circumstances. We are saddened by what has happened  and we wish the individuals involved the best in their future careers.”

None of the partners at Magenta could be reached for comment.