Raffaello, a new private equity vehicle, was launched recently and will seek to capitalize on a combination of its principals’ knowledge of the Italian market, as well as their backgrounds in international corporate finance and experience with initial public offerings.
The initiative is a joint venture between Credito Emiliano’s Euromobiliare Corporate Finance subsidiary and Folio Investments, a firm founded three years ago by former Merrill Lynch & Co. managers to provide corporate finance advice to private equity vehicles. Italian private equity veteran Giorgio Medici, who for many years led Sofipa, heads Euromobiliare Corporate Finance. Folio Investments’ chairman is Stanislas Yassukovitch-formerly chairman of Merrill Lynch’s European operations and current chairman of EASDAQ-and its team includes managing director Adriano Dispenza, who previously headed Merrill Lynch’s Italian investment banking activities, and former Merrill Lynch managers Joseph Vullo and Eric Guerlain.
The four key managers involved in Raffaello are Medici, Dispenza, Yassukovich and Maurizio Bianco who, prior to joining Euromobiliare, worked on private equity projects at consulting firm Bain & Co., including drawing up the strategic plan for Texas Pacific Group’s buyout of Ducati Motor Holding SpA.
A Mingled Strategy
Raffaello, essentially a pre-IPO fund, will seek non-controlling stakes in companies that are likely to go public within a two-to-four-year horizon. The fund also may invest in buyouts and buy-ins-although Dispenza stressed that such deals will be very much in the minority-but will not undertake turnaround or restructuring investments.
Raffaello’s main focus will be on Italian manufacturing, distribution and service companies. The fund also may invest in French or Spanish companies which have a strong Italian connection-either divestitures by an Italian parent or add-on acquisitions for existing portfolio companies-but Dispenza said the managers will not target stand-alone investments in these markets.
As a minority shareholder, Raffaello will look to implement shareholder agreements in order to secure exit control.
According to Dispenza, Raffaello’s status as a domestic Italian/international joint venture offers investors the best of both worlds. “While Italian local banks and institutions tend to be very good at sourcing deals, many lack management skills or IPO expertise,” Dispenza said.
Regarding the fund’s strategy of focusing on minority stakes, Dispenza noted that the companies that traditionally have performed best after IPOs are ones in which the owner has been reluctant to relinquish control.
The market seems to agree: as of its July first close, Raffaello had rounded up euro 45 million ($47.7 million) of its overall euro 100 million target. The European Investment Bank, a number of Italian regional banks including Cassa di Risparmio di Trento e Rovereto, Cassa di Risparmio di Cesena and Banco Salenta, as well as various unnamed international investors signed on to the first close alongside Credito Emiliano Group, the fund’s sponsor. The fund will be looking to its Italian banking L.P.s as an important source of deal flow, thanks to their close involvement with local middle-market companies.
Merrill Lynch is acting as international placement agent for the fund. The sponsors anticipate attracting interest from a number of U.S. investors but ultimately expect Raffaello to be dominated by European capital.
The promoters have set up a London advisory company, EuroFolio, to facilitate deal flow and assist Raffaello’s investees in their international expansion.
Rafaello, Euromobiliare’s first direct foray into the private equity market, represents a further step in its drive to internationalize. The firm recently formed M&A advisory alliances with LCF Edmond De Rothschild Banque and Sal Oppenheim.