, Banco Santander’s alternative financing platform, has closed a €400 million minority joint venture fund to support and accompany private equity. As elEconomista has learned, the vehicle’s initial strategy was to co-invest in high-growth SMEs in Spain and Portugal with EBITDA of over 15 million euros, but the manager has decided to extend the co-investment strategy to companies with a minimum EBITDA of one million euros, maintaining the focus on high growth.
The new Tresmares fund reaches an average size in its investments of between 5 and 20 million euros and the participation in the companies is usually around 5-15% of the share capital. The co-investment product is usually accompanied by direct lending and/or bridge loans for equity syndication. With the combination of products, the maximum size facilitated in some operations amounts to up to 100 million euros”, explains Borja Gómez-Zubeldia, partner of Tresmares Financial Products.
The objective of the new vehicle is to accompany private equity funds with a minority stake that improves their returns and makes it easier to carry out larger operations while maintaining diversification. In addition, Banco Santander’s alternative financing platform makes its information and data technology available to the fund it accompanies, a tool that provides great value in consolidation processes via acquisitions (buy and build in financial jargon). “The reception of the fund has been very positive since it offers a new tool to be able to carry out larger operations and improve profitability”, explains Gómez Zubeldia. “At the same time, it allows greater agility in the signing and closing of operations, which is of great importance in the current market environment, where the calendar of the processes is being shortened significantly and speed has been a key tool. in the acquisition of companies. In particular, the possibility of financing the syndication with bridging loans has been a novel and very differentiating element, as confirmed by the Tresmares partner.
Agility and better returns
Tresmares launched its private equity co-investment strategy in June 2020, just six months after The platform led by Borja Oryazábal and Borja Pérez Arauna detected interest in the market for global financing and co-investment solutions for private equity funds with whom it collaborates in the acquisition of companies. “It is a product that existed before but there were few funds that would facilitate it and the depth of the market was much less than that of direct lending. Private equity funds traditionally go to their institutional investors (limited partners) for co-investments. The solution offered by Tresmares is attractive because it provides greater agility in the execution, together with a significant transfer of return to the private equity fund that we accompany”, he clarifies.
In parallel, Tresmares has launched an additional product: bridge loans for equity syndication to co-investors. “The product is being very well received by the market because the funds are interested in including LPs and the financing line makes it easier for them to close the purchase of the target company and, subsequently, syndicate the equity. Tresmares also guarantees the repayment of the bridging loan from the beginning, so that if part of the equity were not syndicated, our co-investment fund would cover it”, adds Gómez Zubeldia.
first operations
Tresmares completed the first co-investment operation in July 2021 and since then it has closed three operations for an amount close to 40 million. Santander’s financing platform is detecting great interest in the product and its forecast is that the number of co-investments will increase in the coming months, also driven by the high liquidity of the market. “The product is being analyzed by a greater number of private equities that are already getting to know it better and we think that the market share will increase,” adds Gómez-Zubeldia.
Regarding the different situations in which the fund can invest, the Tresmares Partner explains that “the main reason for using this product is to achieve greater agility in the purchase processes, since our execution schedule is very tight. We have approved some operations in two or three weeks and it can be carried out simultaneously with our direct lending to achieve a global solution Another important reason is to optimize profitability Some clients are considering this strategy as an alternative to subordinated and mezzanine debt as it helps improve its return without incurring a higher leverage that increases the risk profile of the investment”, he concludes.
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