- The agreement will broaden Patria’s presence across the private markets value chain
- "“Growth Equity is highly complementary to our flagship private equity business, and expands our product offering to meet a key area of investor demand"
- The partnership is structured in two stages: first, establishing a minority stake during a joint fundraising campaign, and then a full business combination contingent on fundraising success
Patria Investments, leading alternative asset manager in Latin America, has recently announced the launch of a new growth equity strategy through a partnership with Kamaroopin, a private markets investment group previously affiliated with Tarpon Investments and led by Pedro Faria.
As reported by the Brazilian firm in a press release, the partnership is structured in two stages. First, establishing a minority stake during a joint fundraising campaign, and then a full business combination contingent on fundraising success and certain other requirements.
“Growth Equity is highly complementary to our flagship private equity business, and expands our product offering to meet a key area of investor demand. We are excited to partner with Pedro and the Kamaroopin team on this new initiative that will broaden Patria’s presence across the private markets value chain. Our investment philosophies are highly aligned with a sector-based focus, and a commitment to being not just investors, but company builders", ” said Alexandre Saigh, Patria’s CEO.
With market size of more than 15 billion dollars in Latin America, Venture Capital and Growth Equity strategies are in high demand. Venture Capital transaction volume in Brazil has grown at a CAGR of more than 40% over the last decade, with transaction value reaching 6.6 billion dollars in 2021.
A new partner
Kamaroopin was created in 2018, and currently has three invested portfolio companies where they partner with great entrepreneurs as investor operators to drive growth through single minded consumer focus and tech-enabled business models. Their portfolio has generated a 2.7x gross multiple based on June 2021 valuations, led by their signature first investment in Petlove, the #1 digital Petcare platform in Brazil. Kamaroopin’s current portfolio amounts to nearly BRL 1 billion (or more than 175 million dollars) in assets under management, and they are profitable on a Fee Related Earnings basis at current size.
Faria, its founding partner, highlighted that Kamaroopin was founded within the SK Tarpon ecosystem, with the mission to be company builders, operating as true partners of entrepreneurs and teams. "We are taking a step further with the association with Patria, the leading alternative investment firm focused on Latin America. We are inspired by their team leadership and successful investment model. We will strengthen our ability to back many more companies and build consistent and lasting business legacies", he added.
The details of the transaction
While detailed financial terms of the transaction have not been disclosed, the structure will comprise two stages. The first one includes an agreement to acquire a 40% minority stake in Kamaroopin’s existing business for cash consideration, which upon closing will launch a joint fundraising campaign for a new Growth Equity fund.
The second stage would trigger the acquisition of the remaining 60% stake for equity consideration, contingent on achieving pre-defined fundraising objectives, and fulfilling certain other requirements. Should the requirements for the second stage not be satisfied, both firms would have optionality to unwind the transaction.
Patria Investment believes that the agreement will have minimal impact on its near term Distributable Earnings, with the exception of an attractive performance fee opportunity on Petlove. As part of the partnership, it will be entitled to participate in the crystallization of Petlove´s eventual performance fee, in a structure that was designed to provide the best alignment of incentives among all parties.
Upon the closing of stage two of the transaction, Kamaroopin’s earnings would be fully consolidated, and including revenue from the new fund, the strategy is expected to be profitable on both a Fee Related Earnings and Distributable Earnings basis with significant room to scale moving forward.