N+1 stapled deal falls through

Not enough LPs wanted to sell their stakes in two existing funds managed by the Spanish firm, which is also looking to raise at least €400 million for its latest vehicle.

Spanish private equity firm N+1 Private Equity‘s efforts to close a stapled transaction involving two of its existing funds and a new vehicle have fallen through, according to sources familiar with the deal.

The Madrid-based firm was offering investors the option to buy stakes in two of its buyout funds, N+1 Private Equity Fund II and Mercapital Spanish Buyout Fund III, both 2007-vintage vehicles, in an effort to boost fundraising for N+1 Private Equity Fund III.

The deal, which reportedly began in May, failed to close around August because not enough existing limited partners wanted to sell their stakes, according to a source familiar with the transaction. Investors in N+1 Private Equity Fund II include Idinvest Partners, F&C Asset Management and Hollyport CapitalGoldman Sachs Asset Management, Pantheon Ventures and BP Pension Fund are among limited partners in Mercapital Spanish Buyout Fund III.

Financial News first reported the deal had failed to close.

Launched just before summer, N+1 Private Equity Fund III, which is looking to raise at least €400 million, has attracted €100 million from the Centre for the Development of Industrial Technology, Spain’s business financing agency, up to €50 million from N+1 itself as well as some commitments from existing investors, according to sources.

Some potential secondaries buyers shied away from the deal because they said it was too expensive.

“We didn’t end up investing in the deal because we didn’t like the ratio they were offering,” said a London-based investor whose firm considered the transaction. “They were asking too much for the new fund, and we’re not a primary buyer,” the source said.

N+1 declined to comment on the deal.

Stapled deals can be a way for general partners to boost fundraising, with new investors being offered the chance to buy stakes in a firm’s existing funds, while simultaneously committing to a new fund.

N+1 Private Equity Fund II closed on €304 million, beating its €250 million target in April 2008 after nine months of fundraising, according to PEI’s Research and Analytics division. The fund has made investments including electronics manufacturer Teltronic and telecommunications equipment maker Rymsa.

Mercapital Spanish Buyout Fund III is a €550 million fund that focuses on consumer goods and industrial investments in Portugal and Spain. The fund, which was raised by private equity firm Mercapital, was inherited by N+1 Private Equity when it merged with Mercapital in 2012, according to the N+1’s website. The fund is fully invested, according to PEI data.

N+1 specialises in providing mid-market value-added products and services and has offices in seven countries, according to its website. Its asset management unit advises on and manages six asset classes with over €3 billion in assets under management.