In brief: Capza’s deal to share the upside

The Paris-based private markets firm has inked a growth investment with a mould-breaking mechanism to share 40 percent of the value created.

It looks like Paris-based Capza is pushing the ESG boundaries with its latest growth equity investment.

The firm has taken a minority stake in cybersecurity software business Advens alongside founder Alexandre Fayeulle and the management team. A third of Advens’ 300 employees have become shareholders, according to the announcement.

So far so good, but what makes the deal different is the following (per the press release): “A new mechanism has […] been set up to enable Advens to finance this virtuous model. Depending on Advens’ operational performance in the coming years, up to 40 percent of the financial value will be distributed to an endowment fund that will finance large-scale initiatives with a societal impact, particularly in favour of social inclusion and the education of younger generations.

“Ultimately, it could be the largest endowment fund in Europe on this theme. The endowment fund will be supported from the start by Alexandre Fayeulle and Capza in order to quickly launch the first initiatives.”

The mechanism is a different take on the growing trend for sponsors to distribute upside in a way that promotes sustainable business growth and returns while also cementing private equity’s ‘license to operate’ in modern society. Other firms have taken action in this direction by sharing more economic upside with portfolio company employees.

Capza has already been pushing the ESG boundaries with its private debt offerings: last month we noted that it is starting to link loan costs to portfolio companies’ ESG performance for its next fund, as well as linking a portion of its own carried interest to ESG performance.