Coffee Break with 17 Capital’s Nicolò Colombo

By Matteo Lana

Mr Colombo works at 17 Capital, an investment firm that operates both in the private equity secondary market and in structured finance for PE funds. To date, the firm has raised four funds, totaling €2.0 bn. 17 Capital serves customers in Europe and North America.

Could you quickly provide us some color on your background and how you ended up at 17 Capital?

I did my bachelor’s at Bocconi (Biem program) between 2006 and 2009. In 2008 I went to Wharton and there I decided that I wanted to continue my studies in an international environment. In fact, between 2009 and 2010 I continued my studies at LSE doing the Master of Science in Finance. I started my professional career at Credit Suisse in their London M&A team, slightly after being promoted to associate, I moved to Adam Street Parterns (a private equity fund with around USD35 bn in AUM) for 2 years and then in 2015 I finally moved to 17 Capital (USD2 bn AUM) where I was promoted vice president and now I am in charge of execution and sourcing.

What is the main difference between 17 Capital and other private equity funds-of-funds?

17 Capital has an innovative strategy that allows us to operate in a niche. Our focus is on investors with private assets and funds that do LBO operations. Through an analysis of their portfolio, 17 Capital supports growth or liquidity. In this way, we operate in a niche of the market that is not covered by direct lending and funds-of-funds.

What is the current demand for financing in PE during a time of historically high dry powder?

The value of dry powder instruments is the highest in 10-15 years, resulting in assets with higher prices, over supply and low levels of interesting assets for PE funds. It is therefore easier to leverage the price of the assets and this can result in the future in a correction of the market. On the other hand, 17 capital and other PE fund investors desire that their capital be invested, therefore, even if the price of the assets has growth,  problems can arise because prices are much higher than in years past.

Why are there more dividend recapitalizations and how does 17 Capital deal with them?

Dividend recapitalization have been increasingly frequent by investors in order to de-risk their investment and exploit the market conditions that are (today) favorable (for the low interest rates). This has been done in both USA and EU, in transactions that were particularly successful, allowing investors to crystallize the success instead of selling.

What is the appetite for bridge loans and why it is surging?

It is an instrument that has been used for many years because of the low maturity, low costs and margins in order to optimize the cash flow before creating a syndicate with other co-investors. It is a short term, plain vanilla instrument that has often been overused.

Why has the private equity industry not developed in Italy like it has in other European countries?

There are definitely several reasons. For sure the country risk and the political instability are key factors. The majority of funds price this risk in the underwriting of transactions. The volume of transactions and the market is not significant because the administrative, fiscal and juridical infrastructure brings disadvantages. However, In Italy there are numerous SMEs that have KPIs (key performance indicators) comparable to other European countries, but the investment is not exploited because of the country risk. In countries, like France, that have similar industrial trends, investors operate more easily because of the aptitude toward private capital.

What was the most interesting and challenging deal that you made during your career?

When I was a Credit Suisse, the most important transaction was the privatization of a Turkish airport. The buyer in the transaction was Aéroports de Paris. This deal was strategic because it allowed a French company to enter the Middle East market. The deal was around USD1 bn.

Looking at the buy-side, there was not a single transaction that stood out but rather a relationship that was built with a European financial institution for deployment of more than 3 bn with preferred equity. The relationship was developed on 5-6 transactions with the aim of help the growth of their portfolio.

Why would you suggest a career in the private equity industry?

You have the opportunity to relate with the key decision maker of a company, both at junior and senior level. As a result, you can learn a lot both personally and professionally. You work in a team and the task can be different every week or month. Furthermore, the industry itself is efficient (on average) with a focus on the creation of value, with linear decision making and where meritocracy reigns.

 

Editor: Eric Peghini

Author: Matteo Lana