Published on 11/06/22

“Private capital investments in club deal are increasingly appreciated. It may be that the traditional financial markets are too unstable and not enough profitable, it may be that private capital investments through classic funds still require investment tickets that are too high for individual private investors, even wealthy ones, or it may be because entrepreneurs find it interesting and fun to allocate a small part of their wealth to direct investments in start-ups or SMEs, which can also see them personally involved thanks to their industry know-how.

The fact is that in the last couple of years those who have decided to propose investment opportunities in an organized way to groups of private investors have found increasingly fertile ground.

BeBeez has mapped the main players active in this market, without claiming to be exhaustive, because this is a world that often moves under the radar and only emerges when club deal organizers decide to do so on a recurring basis.

The classic structure is for club deal promoters to act with their own investment vehicle, which progressively proposes different opportunities to potential investors, which may be different each time depending on the target. Once a deal is structured, the club deal forms an SPV and invests. This structure then can evolve and the promoters, instead of going out to look for a group of investors each time to whom they propose the investment, set up an investment vehicle where investors participate directly, therefore securing a co-investment option with the same vehicle if they find an attractive proposal.

The latest such vehicle to emerge is Cherry Bay Capital Investment Club, an initiative of the Monaco-based platform Cherry Bay Capital Group already supported industrial families and entrepreneurs with an integrated multifamily office model, between wealth advisory and private capital investments through the organization of club deals. Until now, however, Cbc organized individual investments in Italian SMEs through the construction of individual SPVs in which its clients participated, while the new course now sees the establishment of the new investment vehicle in whose capital participate leading industrial families. The partners will then be able to decide from time to time whether to co-invest with Cherry Bay in the proposed investments, but on the other hand the rules of engagement for each deal will always be the same and are shared at the time of the subscription of the capital increase. The ultimate goal of Mattia Rossi and Luca Morandi, leading Cherry Bay Capital Investment Club, is to bring on board 20 families with a capital of the vehicle of 5 million and raise total investment commitments of 100 million euros to be invested in 3-5 years.

The pioneer of club deals in Italy, however, is Gianni Tamburi with his Tip, which is listed on Piazza Affari, who then structured this activity launching Asset Italia sub holding company, established in 2016 with the membership, in addition to Tip, of about 30 family offices, for a total capital endowment of 550 million euro. It is an investment holding company that allows its members to evaluate individual investment opportunities on a case-by-case basis, offering the possibility of receiving transaction-related shares. But the most recent news for Tip on the club deal front was announced in February, when it acquired a 10 percent stake in Lio Factory, the parent company of a pan-European data-driven alternative investment platform that uses proprietary algorithms together with artificial intelligence, founded by Francesco Marini and Riccardo Sabatini. Lio Factory invests with a single name and deal-by-deal approach, and deals are executed through SPVs. The club deal involves co-investors from Tip, who can invest with equity tickets not exceeding 30 million euro per deal.

In some cases, such as Lio Factory, club deal promoters manage to partner with institutional investors on an ongoing basis, resulting in partnerships. For example, Orienta Capital Partners, whose partners include Augusto Balestra, Giancarlo Galeone, Mario Gardini, Sergio Serra and Lorenzo Isabella, and which often invests alongside the French fund Indigo Capital, which is participated by Alantra. But that’s still not all.

There is another emerging trend that can be traced back to club deals: search funds, investment vehicles established for the purpose of acquiring, managing, and developing a single target company. The promoter of the search fund will also be the one who will manage and develop the company full-time. In practice, in the first instance the searcher secures a minimum capital endowment to finance the search for the right target, after searcher submits the investment opportunity to investors and raises the necessary capital for the acquisition, which will be conducted with an SPV.”

Author: Stefania Peveraro