HgCapital launches £400m TMT fundraise

The vehicle will invest alongside the firm’s £2bn sixth fund. Former Apax executive Matthew Brockman will lead the lower mid-market effort.

HgCapital has begun fundraising for an investment vehicle targeting £400 million (€471 million; $651 million) that will focus exclusively on investments in the technology, media and telecommunications sector, according to several sources.

The fund will not be a completely separate vehicle from the firm’s £2 billion sixth fund, but will give the firm flexibility to target smaller companies in the TMT sector that fall outside the main fund’s investment focus, sources said.

“They are creating an adjacent structure that does not duplicate the TMT effort but expands and leverages the franchise in the lower middle market,” said one source with knowledge of the offering.

Matthew Brockman, who was recruited from Apax Partners last year, will lead the mid-market TMT effort. HgCapital declined to comment.

Two market sources said HgCapital should have no problem hitting the target on the fund, because of its size and also because the firm has performed well for its limited partners, though performance information was not immediately available.

Last year, the firm had one of its largest-ever exits when it sold Visma, a business software company, to Kohlberg Kravis Roberts for an enterprise value of NOK11 billion (€1.4 billion; $1.9 billion). The sale produced an internal rate of return of 37 percent and a 3.7x return multiple on Hg’s original investment.

The TMT space, especially for deals at £50 million and less, offers a lot of opportunities in today’s market, in part because there are not many other firms focusing totally on the sector, a market source told PEI.

HgCapital was formed in 2000 as a successor to Mercury Private Equity. The firm manages about £2.4 billion.