Sherpa Capital raises EUR120m for third special situations fund
Sherpa Capital, an Iberian private equity manager specialising in medium-sized companies, has reached a final close of EUR120 million for its new fund Sherpa Special Situations III, the fourth of the firm after the special situation vehicles Sherpa Capital I and II, and the Sherpa Capital Private Equity fund, which acquires stakes in profitable and growing companies.
This is the first Private Equity fund which closes in Spain since the start of the Covid-19 crisis. Around 75 per cent of the commitments have been made by institutional investors from Europe and North America, the vast majority of which had previously invested in the firm's predecessor vehicles. Reaching a final close during a turbulent market context has been made possible thanks to the track record of the firm, which has historically generated above-market returns, even during the financial crisis of 2008. As a result, the fundraising process began and concluded in just a few weeks.
In the same way as in the predecessor vehicles, the investment strategy of Sherpa Special Situations III is focused on companies facing transformation situations due to the economic environment or as a result of some extraordinary situation of a strategic, operational, financial or shareholding structure nature.
The fund can invest both in family businesses as well as in divestitures of large groups and even in companies going through insolvency or bankruptcy proceedings. A new strategy has been added by which the fund can make debt investments in loan-to-own transactions. Therefore, the fund can cover a broad and flexible spectrum of potential deals.
A key differential advantage of Sherpa Capital is that the firm has an extensive experience acting as an operating partner during transformation situations, supporting management teams in the day-to-day of the portfolio companies. In fact, Sherpa Capital has a large in-house portfolio management team focused on creating value in the businesses that it backs. In this sense, over the last six months the firm has continued to invest in human capital and has hired eight new professionals, reinforcing a team which is currently 32-strong.
Sherpa Special Situations III plans to make between 8 and 10 investments, writing equity tickets of between EUR10 million and EUR25 million, in companies of different economic sectors with turnover between EUR20 million and EUR300 million.
Sherpa Capital has also set up a co-investment vehicle which will enable the firm to complete considerably larger transactions, in deals identified by the investment team in which the firm will co-invest together with its Limited Partners. The new co-investment vehicle will add significant investment capacity to cover a much broader segment of the Iberian market, during a context in which there will be interesting special situations opportunities in companies of a greater size than in which the firm has historically invested.
Eduardo Navarro, Executive President and founding partner of Sherpa Capital, says: "The launch of Sherpa Special Situations III comes at a time in which companies are looking for partners who can bring liquidity and experience managing transformation situations such as the ones which many businesses are experiencing due to Covid-19. Our plan is to continue with the successful strategy of the predecessor vehicles, getting involved with the management teams of the portfolio companies and generating attractive returns for our investors. In that sense, our firm will continue to promote value creation through transformation plans, fostering sales growth and improving operational efficiency ".
Alfredo Bru, founding partner of Sherpa Capital, states: "Our extensive accumulated experience in different economic sectors of the Iberian market allows us to support our investee companies to transform their businesses and overcome their liquidity problems in the current environment. Both in Spain and Portugal, there still exist many companies that are currently looking for a partner to support them in facing the important current challenges”.
Jorge Fernández Miret, partner of Sherpa Capital, adds: "As a result of the current situation, the number of companies looking for a partner like us has increased significantly. We have already identified several very interesting investment opportunities, so we expect to complete a number of transactions with our new fund throughout the year 2020".
With the closing of its fourth fund, the total volume of Sherpa Capital’s assets under management reaches EUR500 million, consolidating the firm’s position as one of the leaders in the Iberian middle-market segment. In this way, the firm has also strengthened its investment capacity in two clearly differentiated strategies: Special Situations and Private Equity.