Banque Heritage continues to grow in Private Markets
The Geneva-based bank's latest investment in the Swiss company LAGOSTA.
Private markets are on a roll. Whether it's because of their promise of high returns, the feeling they give investors of owning a piece of a story yet to be told, or their sometimes uncorrelated attributes, these investments are popular with private clients, even if it is not easy to define what to invest in or how. Venture capital, buyout, mezzanine debt, bridge financing, distressed or turnaround... all these sub-categories have their own codes, their own jargon, and their own rules. Should you invest via club deals and hold a small piece of that promise directly, or should you invest via funds that offer diversification and proven expertise, but often commit investors for long periods of time?
Having always had a foot in the private markets, both personally and through its strategic alliances, the Bank can boast a wide range of experiences in this area. Sallfort PrivatBank, whose merger with Heritage closed in 2019, began its venture capital investments in 2015, with many successes. Moreover, where the bank located on route de Chêne historically participated in initiatives linked to the activity of the managing families from which both branches originate (commodities, freight, real asset-backed operations), the offer has recently refocused, in part, on direct loans backed by real estate. They exhibit average maturities of less than 24 months and yields above 9%. "This niche has the merit of producing recurring income, while offering more visibility in the face of economic uncertainties," explains Mikaël Safrana, Head of Advisory and in charge of this new initiative.
"Our size, with tickets between 1 and 5 million, allows us to engage through "club deals" on operations where traditional players cannot intervene and where returns are a reflection of an inability to access capital rather than the translation of an inherently high risk. In the event of a problem, we still have a collateral asset and a clear view of the deal's breakeven point to preserve capital," continues Mikaël Safrana. As proof, these real estate financing operations represent 75% of the private market investments raised by Banque Heritage from its qualified investor clientele and have proven their resilience, even during the March 2020 crisis.
Banque Heritage’s activity in this segment has doubled each year, and the bank is also active in direct and selective private equity transactions. Agnostic as to the nature of the investment, they share common clear characteristics: a holding period estimated at less than four years, additional guarantees to protect investors and financing structures that are often hybrid in order to satisfy the risk profile of as wide a qualified audience as possible, such as equity participations coupled with convertible bonds, etc. Over the past three years, the team has invested in a total of 26 transactions across all segments, completed 6 exits, including one partial, and expects to close 2 additional transactions by the end of the year.
The Geneva-based company's latest investment is in the Swiss company LAGOSTA, which specializes in the aquaculture of Mediterranean lobsters (Palinurus elephas) in a controlled environment. LAGOSTA initially intended its production for the food industry, offering a 100% organic solution that guarantees unparalleled quality while preserving the natural environment. Thanks to the team's expertise, the company quickly realized that the molts naturally generated by these crustaceans during their growth contained a high quantity of chitin. Once transformed into chitosan in a laboratory, this molecule has multiple and very promising therapeutic applications that have been barely exploited until now because of the biopharmaceutical industry's great difficulty in obtaining quality raw material. "This is the problem that LAGOSTA has decided to solve, repositioning itself as a blue-chip biotech company, recycling waste into wealth," explains Christophe Maier, founder, and CEO. This fundraising aims to enable the company to secure and deploy an industrial-scale production unit, to optimize its transformation process at a high level of excellence and to strengthen its intellectual property with, in particular, the filing of patents necessary to protect its know-how (structure of the pools, identification of individuals, etc.), several years ahead of any competition. "LAGOSTA is a typical example of what we are looking for: a clear and sustainable competitive advantage, a superior product with strong commercial outlets, important operational levers, but also a quality team with outstanding personalities and a solid history, attractive to a private clientele that is increasingly demanding in terms of its investments.”
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