Exclusive: Paragon hits €400m hard-cap

The firm launched Fund II in January and received enough interest to skip a first close.

Munich-based Paragon Partners has wrapped up fundraising for its second buyout fund, according to several sources familiar with the matter.

The fund, which had a €350 million target, was oversubscribed and will be capped at its €400 million hard-cap.

Paragon has now stopped fundraising and is currently finalising all the necessary legal paperwork ahead of a first and final close, the source added. It is understood this process could take until the middle of June.

Rede Partners acted as placement agent for the fund, according to a source with knowledge of the situation. Both Rede and Paragon declined to comment.

Founded in 2004 by former Triton executive Edin Hadzic, Paragon began talking to investors last October when it started to provide data to LPs about the fund’s strategy. It officially started marketing in January this year.

As Paragon was “overwhelmed” by the LP response, it decided not to hold a first close but instead work towards a first and final closing of the fund, one of the sources said. It is understood Paragon’s GP commitment is €12 million, or three percent of the fund.

The re-up rate was close to 100 percent, the source added. All the LPs that re-invested in Paragon’s second fund committed more capital than they did to the firm’s debut vehicle, a €220 million 2008-vintage, the sources said. Of the LPs in the second fund, approximately half come from the US and half from Europe. LPs in Fund II include endowments, insurance groups, and both corporate and public pension funds.

Investors in Fund I include Access Capital Partners, AlpInvest Partners, Goldman Sachs Asset Management, HarbourVest Partners, Industriens Pension, LGT Capital Partners and Unigestion, according to PEI’s Research and Analytics division.

Paragon has made a number of exits from this fund, which on average yielded a return of more than 3x, the sources said. Last October, the firm sold a stake in Schülerhilfe, a tutoring services business for school students in Germany and Austria, to Deutsche Beteiligungs. This exit generated a 4x gross return and 41 percent IRR, PEI previously reported.

Earlier this week, Paragon acquired Vion Food Group’s German convenience retail segment alongside two other investors. It is also in the middle of acquiring Weltbild, a German publishing group, which will be signed in the next few weeks. Both of these acquisitions will be done by Fund I, whose investment period runs out in June.

Paragon targets companies with an “attractive market outlook, a sustainable business model and value creation opportunities”, according to its website. It is understood the firm can invest in both leveraged buyouts as well as “complex buyouts” which involve more distressed-type transactions. The firm will write equity tickets of between €25 million to €60 million, with average ticket sizes of roughly €40 million.