Three Hills hits €540m hard-cap after opening to institutions – exclusive

The Byron owner is looking to make six to eight additional hires over the next 12 months, founder Mauro Moretti tells PEI.

Three Hills Capital Partners, a UK-headquartered private debt and private equity shop, has reached its hard-cap on Fund III after marketing to institutional investors for the first time, Private Equity International has learned.

The firm collected €540 million for Three Hills Capital Solutions III, which had a €400 million target, founder and managing partner Mauro Moretti told PEI. Fund III was the first Three Hills vehicle open to institutional investors, having raised its first two through European family offices and high-net-worth individuals.

Around 60 percent of the capital came from new investors, Moretti said. This capital was divided evenly between North America and Europe.

Three Hills plans to make six to eight additional hires in the next 12 months. Half of these will join the 10-strong investment team and a portion will form an in-house investor relations team, according to Moretti.

Fund III is expected to invest roughly 80 percent of its capital into debt and 20 percent into minority equity stakes. The firm will seek 10 to 12 deals with ticket sizes of between €25 million to €80 million and may deploy follow-on capital into its investments.

The fund is targeting a 15 percent net internal rate of return, Moretti noted.

The firm has dedicated a portion of its investment committee meetings to considering Brexit risk, Moretti said. “We’ve factored some parameters into our due diligence that we wouldn’t have done three years ago,” he added.

Three Hills Decalia, its second fund, closed on €200 million in 2016, according to PEI data. The firm raised €100 million for Fund I, a 2014-vintage.

The firm’s existing portfolio includes Italy’s Magnaghi Aerospace Group and UK restaurant chain Byron. Three Hills became a majority shareholder in the latter in January 2018 after acquiring half of a portfolio belonging to London-based Hutton Collins, where Moretti was a former partner.

European advisory Rede Partners served as placement agent for the fundraise.