3i closes Europe’s largest mid-market fund

Europe’s biggest quoted private equity business has held the final close on its €5bn buyout fund, the largest pool of capital focused on the European mid-market.

3i Buyouts, the private equity group’s pan-European buyout business, has closed its latest fund, Eurofund V, on €5bn, beyond the initial intended target of €3.5bn.

Jonathan Russell: heads 3i Buyouts

The quoted private equity group said it now has the largest fund dedicated to the mid-market in Europe, second only to Cinven’s €6.5 billion European fund, which participates in larger buyouts.

Jonathan Russell, managing partner of the buyout arm, said: “Increasing the fund to €5 billion effectively gives us an extra year’s funding. We will spend it in four and a bit years instead of three and a bit.”

He said it would also accomodate the slow and steady growth in the buyout business.

3i raised the fund from 62 investors from all over the world. It launched fundraising in April and held a first close in summer. Russell said: “It was effectively all done by the first close. Since then we have been going through the legal process and for some investors that is convoluted.”

Russell’s team plan to make around 50 investments across Europe over the next four years, primarily in Europe, but with some scope to invest outside of Europe.

In particular it is looking to deploy capital using its expanding network throughout Asia. Chris Rowlands, managing partner of its Asian business, is relocating to Singapore imminently.

Russell said: “The agreement with investors allows 10 percent to be invested in Asia, where we have seen an opportunity starting to emerge and some exciting deals.”

The allocation was a best guess on present information he said and could go higher, if it was successful and if investors wanted additional exposure. It could ultimately lead to a separate Asia fund, he said. All options are under review.

In the six months to September, 3i’s buyouts division drove group performance returning an “exceptional figure” of 18.9 percent. The group has invested £589 million across all its lines in the six-month period.  Buyouts accounted for £236 million with a loss rate of 5 percent of investment cost from Eurofunds III and IV.

3i Buyouts has about €8 billion in funds under management. It invests in mid-market transactions with a typical enterprise value of up to €1 billion in a wide range of sectors, with a focus on media, healthcare, business services and consumer.

The group is planning to follow this fundraising with an infrastructure fund for a standalone business under Michael Queen its former finance director, the company said at its interim results earlier this month.