In 2001, a Swiss private bank called Sarasin – then owned by Holland’s Rabobank – had promoted to its clients a vehicle called New Energies Invest (NEI), raising about €90 million from institutional and private investors. A local Swiss M&A boutique called Remaco was brought in as investment advisor, and NEI set about building a portfolio of mostly minority venture and growth capital stakes in renewable energy companies.
Initially, everything went pretty well. But in the aftermath of the financial crisis, amid a difficult period for the renewable energy industry, performance went backwards. By 2011, the vehicle was basically a lame duck: some of the six remaining businesses in the portfolio were in urgent need of restructuring and/or refinancing, but the vehicle was fully invested and so had no way of injecting extra capital. NEI had not yet distributed any capital to its investors (any proceeds had been used to make new investments and cover the management fee), and market conditions made it particularly difficult to exit these ailing companies. In addition, many of the original team were no longer with the advisor.
Enter Evoco, a relatively new group founded by Felix Ackermann and Michel Galeazzi, who had previously worked together at 3i Group (before the latter moved onto HgCapital for three years). Evoco specialises in taking over and restructuring ailing funds, injecting capital as required and managing out the portfolio in a way that delivers liquidity for existing LPs.
Having come across NEI, it got in touch with the management team and persuaded them that a fundamental restructuring was required. In practice, this meant pulling the plug on the existing vehicle and transferring the portfolio to a new closed-end Jersey-domiciled limited partnership, with Evoco acting as the new GP. The financial backing for this €20 million transaction was provided by Headway Capital, a UK-based secondaries firm that specialises in small and complex deals like this.
Since the deal closed in the third quarter of last year, Evoco has largely focused on restructuring the portfolio companies (which, it admits, took longer than expected due to the ongoing woes of the underlying market). However, it’s now starting to move into harvesting mode; indeed, it has already started distributing capital to LPs, thanks to a partial divestment.
It’s planning to exit all the assets within three years, so it will be a while before the merits of the deal can be assessed fully. Nonetheless, it does seem to be heading in the right direction – and it does seem to illustrate three of the key aspects necessary for a restructuring like this to work.