Annual Report 2017

Rothschild & Co | Annual Report 2017

Rothschild Merchant Banking

Private equity

In private equity, we manage €3.0 billion with a team of 54 investment

professionals. We have developed two different business lines:

• Corporate private equity;

• Secondaries, multi-manager funds and co-investments.

Corporate private equity

Five Arrows Principal Investments (FAPI)

Launched in 2010, Five Arrows Principal Investments

(FAPI) is our flagship initiative built on Rothschild & Co’s

successful European mid-market investing strategy over

the past two decades.

FAPI concentrates on expansion and buyout deals in the

mid-market segment across Europe. It currently manages

two funds: FAPI I, which raised €583 million in 2010 and

FAPI II, which raised €781 million in 2015. The investment

teams are based in Paris and London.

FAPI I is invested in 15 mid-cap companies in seven

different European countries. Thanks to its affiliation

to Rothschild & Co, the fund has developed a rare pan-

European reach and distinctive sector plays in selected

segments of the economy which it believes enjoy positive

momentum: healthcare, business services, data, as well

as software and technology-enabled services.

In 2017, FAPI I completed four successful exits: full exit of

Autodata for a gross MOIC

(1)

of 2.6x, full exit of Grand Frais

for a gross MOIC of 3.3x, full exit of Munters for a gross MOIC

of 2.5x and full exit of Kisimul for a gross MOIC of 3.2x.

Its successor fund, FAPI II, builds on the same strategy and is

managed by the same team. During 2017, FAPI II completed

four investments: Opus 2, a UK leading cloud-based litigation

and legal transcript management software and services

business, Voogd & Voogd, a Dutch technology-enabled

insurance distribution platform, Menix Group, a French

fast-growing manufacturer and distributor of orthopaedic

and dental implants, as well as related instruments, and

A2Mac1, a fast-growing benchmarking and technical data

provider to the automotive sector. In total, FAPI II has eight

companies in its portfolio.

As at 31 December 2017, the net asset value of the Group’s

investment in FAPI I and II represented €219 million.

In 2017 Kisimul was sold to a leading infrastructure

private equity firm focused on assets with high

revenue visibility. Kisimul is a leading UK-based

provider of specialised education and care services

for individuals with severe learning disabilities. In

late 2009, FAPI identified Kisimul as one of the UK

healthcare sector’s most attractive assets due to its

combination of earnings visibility, niche nature and

politically protected status. During FAPI’s ownership,

the business performed well, with revenue growing

from £31 to £55 million at the time of exit. The

company also generated significant cashflow, which

in 2016 enabled a dividend recapitalisation. The

investment in Kisimul generated a 3.2x MOIC.

In December 2017, FAPI II acquired A2Mac1,

a leading technical benchmarking data provider

to the automotive sector. A2Mac1 specialises in

operating and maintaining a database of over 600

fully disassembled vehicles and their individual

components. Thanks to its unparalleled value

proposition, the company has shown a remarkable

track record of organic growth with more than 20%

revenue compound annual growth rate over the last

five years. FAPI had identified A2Mac1 as a very high

quality asset with a diversified blue-chip customer

base, very low churn and a global footprint. The

company epitomises the classic FAPI investment

thesis combining mission critical product offering

with high barriers to entry, and a compelling story

with multiple avenues of growth.

(1) MOIC stands for Multiple On Invested Capital.