Ardian snaps up Citi spinout as its U.S. middle-market group

Ardian has absorbed Citi spinout Seven Mile Capital Partners as its North American direct investment group, which will be seeking to raise about $500 million for its first fund, according to people with knowledge of the effort.

The seven-member group will be led by Seven Mile’s chiefs, Vincent Fandozzi and Kevin Kruse, a statement from Ardian said. The group is expected to quickly launch fundraising. Whether Ardian will contribute as a limited partner in the pool is unclear.

Emma Murphy, an Ardian spokeswoman, declined to comment about fundraising.

The group will be part of Ardian USA, which is led by Benoit Verbrugghe, Vladimir Colas and Mark Benedetti.

Ardian has worked with Seven Mile since leading the spinout of the group from Citi in 2011. As part of that deal, Ardian acquired direct assets that the Seven Mile team continued to manage, according to Colas.

“They did a really strong job for us on that portfolio with fantastic returns,” Colas said in a recent interview. “When it was time for that team to go out and raise a fund … we said, ‘why not do that within the Ardian umbrella.’”

During the years Seven Mile managed out the old Citi portfolio, the team made a few new investments with Ardian backing, Colas said.

The team has a fairly narrow investment focus: industrials and services related to industrials, according to Fandozzi. The team will source investments in the U.S. but can lean on Ardian’s international platform, especially in Europe, to grow middle-market businesses, he said.

The team looks for companies in which other sponsors “take a superficial view of it and toss that book into the trash bin,” Kruse said. That means companies that have some sort of complicated dynamic, such as a business moving from being owned by a family to institutional ownership, he said.

The team doesn’t look for distressed investments, Fandozzi said.

The team will look at intermediated deals when they involve companies working on sales processes with smaller, regional intermediaries, said Kruse.

Along with a global network, the Seven Mile team will benefit from Ardian’s infrastructure and resources, Fandozzi said.

Ardian already has funds available for direct investments in European middle-market companies. In September, Ardian said it closed its sixth mid-cap fund on 4 billion euros ($4.4 billion) to invest in established European companies with enterprise values of as much as 1.5 billion euros. Ardian raised an additional 500 million euros for co-investments.

Combined with 1 billion euros the firm closed in June in Ardian Expansion Fund IV, Ardian has a 5.5 billion euro platform to invest in European small to mid-cap companies, the firm said in a release.

Action Item: More about Ardian: https://www.ardian.com/en/key-figures

Photo of Benoit Verbrugghe courtesy of Ardian