Botts confident about European mid-market

Armed with a large commitment from minority shareholders Hermes and Bank of Scotland, the UK house is raising its second European mid-market fund.

Botts & Company, the London-headquartered private equity firm, has officially launched BCP 2, its second European mid-market buyout fund.

The fund, which has a target of E325m and is looking to hold a first close in September, has secured a E100m cornerstone investment from investors including Hermes Investment Management and Bank of Scotland. Both institutions own minority stakes in Botts. 

BCP 2 will be investing between E10m and E70m in buyouts and expansion capital situations with a transaction value of up to E200m. Buy and build is the preferred investment strategy. 65 per cent of the capital will be deployed in the UK, with the balance going into continental Europe where Germany is a favoured location. 

Commenting on the launch of the fund, managing director Andrew Haining said it was a very consistent message that Botts was putting out to investors. “In terms of transaction size, type of investment, geography and industry sectors, we’ll be doing what we’ve been doing for the past ten years.”

One strategic change that the firm is set to make with BCP 2 is to focus 100 per cent on management buyouts and expansion capital transaction. BCP 1, which was raised in 1999 and received E220m of commitments, had deployed around 10 per cent of its capital in venture investments in the media sector, some of which were internet-related. BCP 2 will steer clear of venture investments altogether.  

According to Haining, Botts has generated an annual IRR of 50 per cent over the past 10 years and returned two and a half times investor’s money.

To raise the fund, Botts has retained the placement arm of Deutsche Bank and will be working with a Deutsche team led by Bryan Kelley.

Haining said the prospects for the fundraising were good, adding the firm was confident it could bring in a number of new investors both in Europe and the US. “From the feedback we are getting, the European mid-market remains an attractive sector. If the market turns out stronger than we think, we will be happy to raise more capital.” Around 40 per cent of the fund’s resources is expected to come from US investors.