Dear Friends from the Quilvest Community,
As we reflected on the past few months during our recent Investor Days, I was filled with immense pride for the resilience and dedication demonstrated by our entire team and partners. The past few years have been a period of significant challenges for the industry and of remarkable achievements for Quilvest Capital Partners. I am pleased to share our journey, insights, and our strategic focus for the coming period.
What has happened since our previous Investor Days – 18 months ago?
We left 2022 as a year where the industry was challenged: portfolios were absorbing the exceptional combination of rising interest rates, high inflation, continued supply chain and labor market disruptions since COVID, and a very volatile geopolitical environment. The very low churn of assets late in 2022 and into 2023 dramatically reduced distributions to investors, some already suffering from the denominator effect due to losses on their fixed-income portfolios or overexposure to tech or market volatility. The effects on our industry were quite severe, with at least 50% less fundraising than in prior years. Articles in the financial press about the end of buyouts and allegedly highly overvalued PE portfolios flourished.
Quilvest’s Response and Strategy
So where did this leave Quilvest Capital Partners, and what have we been doing?
I genuinely believe this cycle has vindicated the merits of a focused middle and lower-middle market investment strategy across private capital, highlighting the relevance and resilience of the Quilvest model and positioning.
Firstly, the drought of exits and deals has been mostly felt on the higher end of the market. Deal activity in the middle-market and lower middle-market has remained robust, using much less leverage and with no dependency on the stock markets for exits. Since our last Investor Days 18 months ago, at Quilvest, we have deployed $750m across all asset classes and distributed $900m to our investors. Our recent investments in Cabaia, RCA, Ermitage, and Acuiti Labs demonstrate our ongoing ability to identify and nurture high-potential companies across select sectors.
Secondly, our teams have remarkably well adapted to the new norm: our investment teams, the GPs we invest with, the management teams of our portfolio companies, and the asset managers of our real estate assets all demonstrated incredible resilience, constantly improving their skill sets and their flexibility to face all these external shocks. In the last 18 months, we have strengthened our team by recruiting 27 professionals from renowned industry peers and promoting several internal talents to leadership positions. These strategic additions and promotions are pivotal in driving our future growth.
Thirdly, we have remained highly selective and conservative. We haven’t changed our valuation methodology, which remains transparent, well-documented, and more conservative than industry standards. As our track record demonstrates, we constantly sold at higher marks than our books and created value in our portfolios.
Last, but not least, I want to emphasize our belief in our responsibility towards society. Sustainability has always been central to our firm, deeply rooted in our historical family shareholding structure and DNA. Our recent investment in NG Group, a leading Nordic provider of circular solutions and environmental services, exemplifies our commitment to pioneering sustainability.
Looking Ahead to the Rest of 2024
As we continue through 2024, we are poised for an exceptional year. It started with the IPO of BBB, a hard discount retailer in Mexico we funded from scratch in 2004. On February 9th, the company was listed on NYSE at a market cap of $2.3 billion, achieving a 60x gross CoC for first-round investors, a blended 35x gross CoC across the three funding rounds, and a net 19.5% IRR over 20 years.
In addition to this success, we expect an exceptional year for distributions, with several assets well-positioned for full sales or refinancings. We are also thrilled about our investment pipeline across all asset classes and new products, including the European sleeve for Buyout Fund III, our US Co-Investments Fund, a soon-to-be-launched GP-Led Secondary Product, and new exposure to high-quality middle market credit.
Conclusion
As we move forward, we remain committed to fostering a sense of community and alignment between all stakeholders – investors, team members, and shareholders. This proximity and unity have been key to our success and are what set Quilvest apart.
Thank you for your continued trust and support. We look forward to sharing more successes and navigating the rest of 2024 together.
Warm regards,
Alexis Meffre
CEO, Quilvest Capital Partners