The ex-3i team looking to spice up Iberian PE

“I bought furniture second-hand, I brought the coffee machine from home; this is what you do when you have a start-up.”

The coffee machine belonged to Maite Ballester, managing partner of Nexxus Iberia and former head of Spain at private equity giant 3i. A 19-year veteran of 3i, Ballester launched Madrid-headquartered Nexxus Iberia as a joint venture with Mexican GP Nexxus Capital in 2016.

The firm – which held a first close on €130 million for its eponymous debut fund in January – completed its first deal last week with an investment in Spanish telecommunications specialist Fuertes Gimeno Comunicaciones. It is aiming to hold a final close on at least €200 million by January.

“When you do a start-up, [in] year one the cost of setting up a new fund is so much higher than if you’re on fund three because you already have established lawyers, CRM and IT systems,” Ballester told Private Equity International. “You never have a net amount in a first fund of extra dividends to pay extra bonuses to people.”

Ballester’s comments may be surprising to some, given the impressive team she has helped to assemble. Alongside her sit four fellow alumni of 3i, including ex-partner Pablo Gallo and ex-managing director Mark Heappey, who joined as a strategic advisor in April.

The firm is partly owned by Mexico City’s Nexxus Capital, which has more than $1.5 billion of assets under management, according to a Nexxus Iberia spokesman. Nexxus Capital is in market with a debut mezzanine debt fund, for which it is targeting 4 billion Mexican pesos ($204.7 million; €175.8 million), according to PEI data.

The Iberian fund, which has a €250 million hard-cap, is expected to be closer in size to the target, Ballester said. Partners from Nexxus Capital and her own division have committed 3.5 percent of the vehicle between them, with the carried interest “more skewed toward the dedicated team in Spain”.

Around 85 percent of its commitments have come from Europe, with existing LPs including the European Investment Fund, Fond-ICO Global – a Spanish state-backed fund of funds – and banking group Banco Sabadell, she added. It has also attracted investments from Spanish and Mexican family offices.

The fund will primarily target eight to 10 majority or minority investments in small- and mid-cap Spanish companies of between €4 million and €10 million EBITDA, with up to a 10 percent allocation to Portugal. It will use its ties with Mexico to accelerate portfolio companies’ international expansion to Latin America.

“Our target returns are north of 3x,” Ballester said, noting that the firm will limit leverage to 2x EBITDA.

“Spain is a gateway to Latin America for Europe and we have experienced that through our [former] 3i portfolio. When we build companies from Spain and make them grow into LatAm we ended up getting higher multiples on divestment than when it was just Spain and Europe because of the growth factor that most of the trade buyers think Columbia, Mexico etc bring to the table.”