GP Profile: Quadrivio plots busy investment schedule for 2021

Established in 1999, Quadrivio has a specific focus on Italian SMEs with high-growth potential and ambitious expansion plans. The firm is led by founding partners Walter Ricciotti and Alessandro Binello and has completed more than 100 investments, deploying around €2bn since inception.

“We target Italian companies with turnovers in the €20-100m range, buying majority stakes in family-held businesses,” Ricciotti says. “We work in partnership with founders and managers who are happy to reinvest to retain significant minority stakes in their businesses, and are willing to take part in a development project. Our mission is to transform a family business into a market leader with an efficient business model, able to successfully compete in the international markets.”

Quadrivio is currently managing three thematic vehicles, which are all in fundraising: Made in Italy, Industry 4.0 and Silver Economy Fund.

Furthermore, Quadrivio told Unquote that it has a strong pipeline for the coming months and is working on five new deals, which it expects to be inked by the end of the summer.

With Made in Italy, Quadrivio plans to make a new platform deal by acquiring an Italian company operating in the wine e-commerce sector. Furthermore, the GP is working on two add-ons, one for fashion group 120% Lino and a second for wine business Prosit.

120% Lino intends to acquire an Italian company specialised in the production of luxury sneakers. Following this add-on, the fashion group controlled by 120% Lino is expected to exceed revenues of €100m, with an EBITDA margin of around 20%, the GP told Unquote.

Prosit plans to bolt on a company based in the US and specialised in wine distribution, which will allow the business to further expand into the North American market.

With Industry 4.0, Quadrivio intends to ink two platform deals in the coming months, both in Italy, one in the agri-tech sector and another in the non-woven fabrics industry.

“All our portfolio companies and the businesses that we have included in our pipeline have a strong international focus and are able to generate a large share of their sales in the international markets,” Ricciotti says.

The GP is also already building the pipeline for its latest vehicle, Silver Economy Fund, and is currently working on two deals that will “probably” be inked this autumn. The first investment is very likely to be an acquisition in the US, where the fund has a strong team supported by three advisers with extensive experience in investments across the so-called silver economy, encompassing products and services targeting the over-50s.

Thematic approach

The first thematic fund launched by Quadrivio was Made in Italy, which supports the expansion of Italian companies operating in the fashion, design, beauty and food industries. It targets businesses with annual revenues of €10-60m and deploys equity tickets in the €10-20m range.

The fund was launched in January 2018 in partnership with advisory firm Pambianco Strategie d’Impresa, with an initial €200m target. It held a first close in March 2018 on €100m and subsequently increased its target to €300m. The fund expects to hold a new interim close in May 2021 on around €230m and a final close by Q3 2021, Quadrivio told Unquote.

Made in Italy recently inked its seventh deal, Dondup, an Italian luxury clothing producer, acquired from private equity firm L Catterton. Following this deal, the vehicle has already deployed more than €140m.

The fund’s portfolio also includes: luxury furniture specialist MOHD, bought in October 2019; natural skin care products manufacturer Rougj, acquired in December 2019; fashion accessories specialist Rosantica, bought in September 2020; and streetwear brand GCDS (God Can’t Destroy Streetwear), purchased in November 2020.

Quadrivio is currently raising Industry 4.0, which was launched with a €300m target at the beginning of 2018 and held a €100m first close in October 2018. Its final close is expected in the second half of 2021. The fund invests in SMEs operating in the manufacturing industry that show strong potential to grow further via digitalisation and automation.

Industry 4.0 has invested in three companies so far: restaurants and bars operator Nabucco (F&DE Group), bought in June 2019; rotational moulding business Rototech, purchased in July 2019; and sport merchandising specialist EPI, acquired in December 2020.

Finally, the Silver Economy Fund has a €400m target and is dedicated to investments in companies that offer products and services to people over 50, primarily baby boomers (people born between 1946 and 1964) and the elderly. It focuses on businesses with EVs of up to €200m and deploys tickets in the €20-50m range. The GP told Unquote that it expects to hold a final close by the summer.

Portfolio resilience

“Made in Italy’s portfolio companies have shown strong resilience to the pandemic’s challenges and have recorded good performance despite the lockdown,” Ricciotti says. “Most of them have had an excellent start to the year, increasing their revenues above expectations in Q1 2021. Among others, MOHD and Prosit have recorded an average annual growth rate of 50% and 20%, respectively. Furthermore, 120% Lino, which generates 70% of its sales in the US, has seen a significant increase in revenue in 2021, once the American economy started to pick up again.”

The portfolio companies in Industry 4.0 are also putting the crisis behind them, Ricciotti points out. EPI, which distributes merchandising for football and basketball teams, recorded a 20% growth in 2020 and expects to exceed turnover of €30m in 2021, the GP told Unquote.

“EPI has been outperforming and we plan to expand its activity by penetrating new segments and additional sport verticals,” says Ricciotti. “F&DE and Rototech experienced a mild slowdown in 2020, but have increased their activity since the beginning of the year.” The GP forecasts turnovers of at least €70m for F&DE and more than €55m for Rototech in 2021.

Says Ricciotti: “The reason why our funds haven’t encountered many difficulties during the pandemic is that we have been building solid and resilient portfolios long before Covid spread across Europe. We have always selected high-growth investments with strong consolidation potential, have used very moderate leverage in our buyouts and have acquired our assets at reasonable multiples. After the coronavirus outbreak, we were able to continue to deploy our funds and select several great assets to further expand and complement our portfolios. This strategy has allowed us to increase the value of our funds and attract new investors for our ongoing fundraising projects.”

Quadrivio has an investor base primarily composed of institutional investors, including banks, pension funds, insurance companies and funds-of-funds. Historically, institutional investors made up 90% of the firm’s LP base, but recently the number of private investors – mainly family offices and high-net-worth individuals – has increased, reaching around 25%, the GP told Unquote.

“Institutional and private investors are attracted by our strategy, which is based on three main pillars: strengthening a company’s structure and organisation; boosting its international expansion; and reinforcing its consolidation with a buy-and-build strategy outside of Italy,” Ricciotti says. “We have built several strong platforms, bolstered their market position and increased their value via intensive add-on acquisitions, not only across Europe, but also the US and Asia. Furthermore, thematic and sector-focused funds are becoming more and more attractive for LPs.”

Investors in the funds are predominantly from Italy and the rest of Europe, with a small number of American LPs. “We plan to increase the number of our US investors,” Ricciotti says. “We have an office and a strong team in New York and intend to strengthen and further broaden our relationships with American LPs. We have already seen a rising interest among them for our thematic funds, including our new vehicle dedicated to the silver economy, which has a strong focus on North America”.