Carlyle closes €530m Euro tech fund

The fund, which is twice the size of its predecessor, has made its maiden investment: a £50m secondary buyout of a UK-based aerospace parts supplier.

The Carlyle Group has closed its second European technology fund, Carlyle Europe Technology Partners II, on €530 million, twice the size of its 2006 predecessor and €30 million above its original target fund size.

Carlyle began marketing the fund 16 months ago in May 2007. All investors from the fund’s predecessor re-upped, according to the firm.

The fund will make investments of between €20 million and €60 million in small- and mid-cap buyouts and expansion capital in Carlyle’s preferred sectors of aerospace and defense, media, telecommunications, healthcare, industrial and financial services.

At the same time, Carlyle has sealed the first investment for the fund. It has bought UK-based aerospace technology company Gardner Group, which supplies aircraft makers such as Boeing, Airbus and Rolls-Royce. Garner was acquired from Rolls Royce and British private equity firm Dunedin for an undisclosed amount, although one source close to the deal said it valued the company at around £50 million (€63 million; $81 million).

Carlyle ranks number one in PEI Media’s PEI 50, having raised $52 billion in the last five years. The firms’ European activity now comprises €15.4 billion under management in 17 funds.

The new fundraise follows Carlyle’s move away from venture capital investing in Europe, having not raised a venture fund since 2000.

While the firm is still active in the US venture capital market – it finished raising its third US venture fund in 2006 on $605 million – it has signaled a move away from the area by rebranding Carlyle Venture Partners as Carlyle Growth Partners.

Venture capital now represents around 20 percent of Carlyle Growth Partners’ activity in the US, with the remaining 80 percent being larger growth capital deals. This proportion is unlikely to change in the foreseeable future, according to the firm.

“The regulatory and fiscal environment is not as supportive for risk-taking in Europe as it is in the US, or even as it is becoming in Asia. Venture capital investing in Europe is a tough business to be in,” said David Fitzgerald, managing director at Carlyle, in an interview with the Financial Times.

Earlier this year 3i UK-headquartered global buyout group 3i officially announced a departure from venture capital investing to focus on larger deals.