IK to continue aim of ‘doubling company earnings’ with Fund X

The mid-market firm plans to back about 20 companies in Northern Europe with its IK X Fund, US pension documents show.

IK Partners is back in the market with its 10th flagship offering, nearly two years after closing its predecessor.

Documents prepared for the Minnesota State Board of Investment‘s 14 February investment advisory council meeting show the mid-market firm is planning on backing approximately 20 companies with an equity size of between €100 million and €300 million.

With an average ticket size of €200 million, this suggests IK could seek around €4 billion for the fund. The firm had previously raised €2.85 billion for IK IX Fund, which held its final close on its hard-cap in 2020, according to PEI data.

The Minnesota documents show IK X’s fund size as “not yet determined” and a spokesperson for IK Investment Partners declined to comment on fundraising.

Capital raised from Fund X will target consumer, industrials, business services and healthcare sectors, the Minnesota documents show.

Fund X will invest in regional mid-market companies in Northern Continental Europe, with core geographies Benelux, DACH, France and the Nordics. The IK X fund will also have a team focused on the UK market. Target companies will have enterprise values of between €250 million and €1 billion, with strong potential for growth via add-on acquisitions and international expansion.

The fundraise comes less than a year after IK gathered €1.2 billion for IK Small Cap Fund III in a three-month fundraise. The fund exceeded its €1.1 billion hard-cap and is more than double the size of the 2018-vintage, €550 million Fund II.

A centrepiece of IK’s mid-cap strategy is to double the earnings of its portfolio companies, according to the documents. In the 40 investments made from its three latest mid-cap funds, the EBITDA margin was 25 percent and the cash conversion rate, 78 percent. Eighty percent of these investments have executed buy-and-builds, with 120 add-on acquisitions between them.

IK’s latest offering is among a slew of Europe-headquartered funds on the fundraising trail this year, including: EQT, which is seeking €20 billion for its 10th flagship; Apax Partners, which the Minnesota documents show has a target of $13 billion for is 11th fund; Hg, which seeks to collect at least $8.5 billion for Hg Saturn 3; and PEI Media owner Bridgepoint, which is targeting €7 billion for its seventh Europe fund, according to PEI data.

Europe-focused funds in market are targeting some $98.8 billion between them, according to PEI’s full-year 2021 fundraising report.