CBPE closes Fund IX on £459m hard-cap

The UK-focused fund, which had excess demand before the Brexit vote, includes a GP commitment of 2%.

UK lower mid-market firm CBPE Capital has held a final close on its latest fund on its £459 million (€538 million; $600 million) hard-cap, according to a statement from the firm.

The final amount includes a GP commitment of £9 million, or 2 percent of third-party capital.

CBPE began premarketing for the fund, which had a target of £425 million, in the spring of 2015, and sent out the private placement memorandum in May 2015. The firm held a first close on £175 million in December 2015, and in June had amassed £400 million for the fund, as reported by Private Equity International.

Twenty investors committed to the fund, including strong support from existing investors and a number of commitments from new LPs, the firm said.

It is understood that around 75 percent of the fund’s investors are European and 25 percent are non-European, predominantly US-based, with 1 large Asian investor.

CBPE IX is the firm’s second fund since the group spun out from UK investment bank Close Brothers in December 2009. Its predecessor, its first independent fund, closed on £405 million in January 2010 after more than a year in market.

CBPE had a goal to reduce the number of investors in Fund IX from its predecessor, which had more than 30 investors, including some “quite small investors in Europe without formal private equity programmes”, managing partner Sean Dinnen told PEI. As a result of reducing the investor base, the average commitment increased “significantly”.

Dinnen said investors’ enquiries concerning Brexit differed significantly by geography.

“Certain territories were more interested than others. US investors, for example, were less concerned than within Europe, for example German investors were particularly concerned, French investors slightly less so.”

CBPE targets investments in UK-headquartered businesses with an enterprise value of between £25 million and £150 million, predominantly primary buyouts and growth capital situations. Of the 13 deals in Fund VIII, 10 were primary transactions, Dinnen said.

CBPE has already begun investing Fund IX. In May the firm acquired a majority stake in caravan and holiday home manufacturer ABI Group from LGV Capital for an undisclosed sum.

Dinnen said that when the UK referendum took place CBPE had two other deals in exclusivity. One – a healthcare services business – has gone forward and is expected to complete in the next few weeks.

“The other deal we didn’t proceed with because, candidly, the risk-reward on the pricing was such that we felt that given the changed circumstances that wasn’t appropriate.”

Dinnen said the pipeline for new investments is “slightly down” on the first half of the year, but not materially, and that, despite high pricing in the UK, there are “sufficient opportunities for us to invest on terms that we’re comfortable with”.

CBPE has made 42 investments since 2000 and has realised 30, 12 of which have returned more than 3x capital and four of which have returned more than 7x capital, the firm said. Aggregate realised returns since 2000 are 2.8x.

Recent successful exits for the firm include the realisation of its £9.4 million investment in IDIS, which it sold to AIM-listed speciality pharmaceuticals and pharmaceuticals services business Clinigen in a deal valuing the business at £225 million in April 2015, generating a 22x return.

In the same week CBPE agreed to offload its majority stake in UK holiday park owner and operator Away Resorts to LDC, the buyout arm of UK-based Lloyds Bank. LDC said it would be investing £18.5 million in the business, as reported by PEI.

In July 2015 CBPE sold restaurant chain Côte Restaurants to BC Partners in a deal generating a 2.9x return and an internal rate of return of 79 percent. The firm had held the business for less than two years, having backed the existing management team led by Harald Samuelsson and Alex Scrimgeour in a transaction in September 2013.

Dinnen said that while a number of CBPE portfolio companies have attracted unsolicited offers for acquisition, it is not currently marketing any of its businesses for sale.

“Larger buyout houses see now as perhaps a good time to go and make offers for high-quality businesses held by lower mid-market houses, perhaps partly to see what their resolve and desire to hold those businesses in a post-Brexit environment is.”