France’s Eurazeo is aiming to be one of the biggest growth investors in Europe.
The firm is set to launch its third growth fund this year, targeting €1 billion, Eurazeo chief executive Virginie Morgon said during its half-year earnings call on Thursday.
“We have major ambitions for growth investing. Our ambition is to raise a fund as early as this year and we are already discussing this with several investors,” she said.
“There is a lot of potential and demand for growth capital in Europe. We also think that our timing is ideal. Today is a key moment for the growth market.”
Along with the launch of Fund III, the firm has hired two investment professionals for its growth team. One will be based in Berlin and the other in London, Morgon said.
The Eurazeo Growth division was born out of the merger of Idinvest Partners’ growth team and Eurazeo Croissance last year, following the firm’s acquisition of Idinvest.
Fundraising plans for Eurazeo Growth Fund III were revealed in the firm’s investor day presentation in December last year. If successful, Fund III will be roughly 60 percent larger than its €630 million predecessor.
Capital raised for Fund III will back the expansion of fast-growing and innovative European companies. With the step up in fund size, the firm is also expecting to make larger investments, averaging between €30 million and €50 million per deal, and could go upwards of €50 million.
Morgon noted investor appetite for growth investments in Europe is largely driven by more and more companies achieving “the necessary degree of maturity”.
According to Morgon, the number of unicorns Eurazeo has identified in Europe has grown nearly eight-fold in five years. “We have less to envy in the American market. There has been a major re-balance in the number of opportunities and unicorns created in Europe.”
The firm estimates a financing gap of €2.5 billion for these companies to accelerate their growth in the coming years.
Recent investments from the Eurazeo Growth funds include London-based online luxury retailer Farfetch and French online DIY marketplace ManoMano.
Eurazeo’s total assets under management increased 8.9 percent to €17.7 billion in the first half of 2019, from €16.3 billion as at end-December 2018. The H1 2019 total comprises a net asset value of €6.1 billion and €11.6 billion of third-party capital.
The firm raised approximately €1.3 billion of capital commitments in the six months to June, which is already 80 percent of its full-year fundraising total in 2018. Third-party commitments this year include €547 million for Idinvest Private Debt Fund and €692 million for Eurazeo Capital IV, which had a €2.5 billion final close this week.
Across its divisions, the firm made €1.3 billion of investments and €1.2 billion of divestments in the first half.
International expansion is a key pillar of the firm’s growth strategy. Major transactions over the last three months include its €1 billion fund with China Investment Corporation and BNP Paribas as well as its 25 percent stake in Spanish firm MCH Private Equity.
The firm is also expanding its global teams, with a new office in Seoul as well as another in Paris this year for Eurazeo Brands, a division launched in 2017 to invest in high growth brands in US and Europe.