Darwin closes £217m debut fund

Amid tough fundraising conditions for first-time funds, the CVC and Permira spin-out fell shy of its £250m target but rounded up commitments from big fund of funds players including Pantheon and OXIP.

UK lower mid-market firm Darwin Private Equity has received total commitments of £217 million (€270 million; $381 million) for its maiden fund.

The total is less than the £250 million it had been targeting, but represents a successful fundraise for a first-time fund given current market conditions, partner Jonathan Kaye told PEO.

“We set the target back in May 2007,” he said. “The fundraising environment has got tougher.”

The fund’s limited partners include AIG Investments, Goldman Sachs, Swiss alternative asset manager LGT Capital Partners; fund of funds Oxford Investment Partners and Pantheon Ventures; and publicly listed investment trust RIT Capital Partners. Half of its LPs are UK-based, with the remainder from the US and Europe.

Darwin was founded in 2007 by Kaye, formerly of CVC Capital Partners, and Derek Elliott and Kevin Street, both formerly of Permira.

“The key Darwin difference, we believe, is we are bringing a large buyout approach to the lower mid-market,” Kaye said. “Not only are we running Darwin like a large buyout business, with the same levels of professionalism as those firms, but we are bringing those techniques, skills, experience and networks to a part of the market” which has not benefitted from them previously, he added.

The fund will focus on UK-based companies valued at between £10 million and £100 million in the consumer, media and technology, industrial, financial and business services sectors. Kaye said the fund will likely invest in a total of 10 to 12 companies, doing two to three deals over a four-year period.

Its first deal, the £75 million acquisition of sports nutrition company Maximuscle, was completed in December 2007. The next is likely not far behind.

“Even though deal flow is down in 2008 versus 2007, [the lower mid-market] is still relatively resilient,” Kaye said. “There’s a lot of deal flow and we are seeing our fair share.”

Coinciding with its fund close, the firm said it has further expanded its investment team with the hire of Katie Beck, previously with Doughty Hanson. Her hire brings the total number of investment professionals to eight.