Five Arrows Principal Investments
Five Arrows Principal Investments (FAPI) is the European corporate private equity business of Merchant Banking.
Based in London, Paris and Luxembourg, our investment professionals manage €2.8 billion of capital focused on investing in middle-market companies in Western Europe.
We focus on the European lower middle market, a traditional stronghold of Rothschild & Co. We look for companies valued between €50 and €500 million, where we seek to deploy equity tickets of €40 to €100 million per investment. In addition, we have the ability to commit substantially more than €100 million to a single transaction upfront, thanks to extensive co-investment agreements with our investors.
We believe the middle market holds the greatest pool of businesses that meet our risk appetite and yet have significant headroom for further growth.
We seek to support businesses across Western Europe. We primarily focus on either 'domestic franchises' - high-quality businesses with significant under-penetration in their local jurisdictions - or 'export champions' - businesses with strong local market positions but with offerings that can be internationalised.
We have found that both types of businesses can benefit from the combination of our local, 'on the ground' networks and global reach.
We invest alongside partners, including entrepreneurs, family owners, management, financial sponsors and corporates. We are flexible about the situations that we look to invest in, which include growth capital, replacement capital and traditional buyouts. We use financial leverage where appropriate and always with utmost care and conservatism.
We look for high-quality companies led by talented management teams who care deeply about the businesses they run. Specifically, we seek businesses which:
- Have an entrenched and sustainable competitive position
- Have a track record of generating attractive returns on invested capital and free cash flow across multiple economic cycles
- Benefit from positive structural market trends, providing high visibility on expected volume growth
- Present multiple untapped levers for operational improvement or corporate development
The composite picture is one of companies with recurring, predictable and visible revenues and cash flows.
Our targeted business characteristics are typically found in asset-light service businesses or product businesses which have a strong service component. We particularly focus on and have deep experience and perspectives in the following sectors:
- Data and Software
- Technology-Enabled Business Services
Within these, we are focused on specific sub-sectors that best meet our investment criteria.
We leverage our reach across Europe to pick attractive sector themes that we want to back and work from there to identify specific investment opportunities. As a result, we have well-developed points of view on what we like to invest in and have commonly followed the businesses we invest in for long periods of time prior to the completion of a transaction.
This approach, combined with our domain expertise, allows us to move quickly, be decisive in our responses and agile in our ability to commit capital.
The most distinctive aspect of our business model is our dense network of industry executives - both active and retired - across Europe in each of our core sub-sectors. Our investment teams utilise these operators for every deal in order to develop proprietary angles on embedded upsides invisible to industry outsiders.
Owners and managers of our portfolio companies often find in our operators a tremendous resource to develop commercial opportunities and test new business ideas.
We seek to support strong, motivated management teams with whom we establish a relationship of trust. Our approach is to then 'let management do their job'. At the same time, as an engaged shareholder, we are looking to support and guide great companies to become even better and achieve their full strategic potential. Our input is tailored to the needs of companies and we do not shy away from providing strategic or operational support when needed.
Our involvement can range from helping to upgrade management control systems, to developing frameworks to boost R&D and capital investment, providing support for bolt-on acquisitions and leveraging our network to introduce new customers and aid in product and geographic expansion.