ECI Partners, one of the UK’s oldest private equity firms, has managed to attract £430 million (€486 million; $642 million) for its ninth fund, ECI 9, in just three months of marketing.
Current market conditions are making fundraising increasingly difficult for GPs, as LPs struggle to honour capital calls and battle with the denominator effect. A survey yesterday revealed that most LPs have declined to re-up with at least one of their existing managers.
There are slightly different types of deal available in the current market.
Against this backdrop, subscriptions to ECI 9 exceeded the firms’ £400 million target. Existing investors, some of whom have invested in ECI’s previous six funds, accounted for 90 percent of the commitments, illustrating that while LPs may be suffering, many have further capacity to invest.
Capital constraints did, however, cause two of ECI’s historic investors to stay out of the latest fundraising.
As well as track record and performance figures – ECI has returned three times investors’ money since 1990 – the firm attributes its subscribers’ loyalty to its “continuity of approach”.
Fund IX will follow the same strategy – investing in businesses with enterprise values of between £10 million and £150 million – as its predecessor, which closed on £255 million in 2005.
“While the overall strategy remains the same, there are slightly different types of deal available in the current market,” Steve Tudge, managing director of ECI, told PEO.
The firm will increasingly look to the public markets, in particular London’s AIM, as a source of deal flow, said Tudge, in light of poor liquidity levels and lower multiples among listed companies. Earlier this year ECI completed the £100 million take private of pharmaceuticals company Premier Research.
ECI also predicts an increase in deal flow from large conglomerates spinning off non-core “corporate orphans” as they try to generate cash flow.
The firm, which has a capital base of £880 million, will begin investing ECI 9 in the second quarter of 2009.