Investors pile into Triton’s latest fund, keen to tap Europe’s mid-market

The European manager's latest lower mid-cap fund raised €815m, well over its €600m target and 80% more than its 2017-vintage predecessor.

Triton Partners has held the final close on its latest lower mid-cap fund after almost a year on the fundraising trail.

The London-headquartered firm gathered €815 million for Triton Smaller Mid-Cap Fund II in a fully virtual fundraising process, according to a statement seen by Private Equity International. Triton began raising capital in mid-March last year with a €600 million target.

TSM II had “considerable investor demand” and had to increase its hard-cap during the fundraise, according to Andi Klein, managing partner and head of TSM. He declined to comment on the fund’s hard-cap. The fund has “attracted a broad range of institutional investors from around the world, with new commitments from 28 investors and strong re-up rates from existing Triton LPs”, Klein wrote in an email response to PEI.

Klein noted that Triton is one of the largest investors in the fund, and fund terms were broadly similar to those of the firm’s previous vehicles.

Similar to the firm’s flagship funds, TSM II will focus on businesses in the services, consumer, healthcare and industrials sectors. Typical equity commitments are between €40 million and €100 million, according to the statement. Triton primarily invests in the Nordics, Germany, Austria, Switzerland, Spain, Italy, France and Benelux.

While TSM II will maintain the strategy of its predecessor fund, Fund II can “take on more complex investments”, Klein said in the email. “TSM I was largely invested in a different economic environment than what we see today. The current market conditions may create a slightly different set of opportunities.”

TSM II is more than 80 percent larger than its €448 million, 2017-vintage predecessor. TSM I made 10 platform investments, along with 22 add-on investments and one exit. The fund delivered a net internal rate of return of 20 percent as of end-December 2020, according to Klein.

TSM II completed its first deal, the acquisition of Klinik Schöneberg, in December. Klein noted that the deal with an orthopaedic surgical centre has already been signed, with further add-on investments in the pipeline.

Triton is also deploying its fifth flagship vehicle, which held its final close on €5.2 billion in 2018. It is unclear how much of Fund V has been deployed and Triton declined to comment on the matter.

European mid-market buyouts are the second-most favoured strategy by LPs after US mid-market buyouts, according to Probitas Partners’ Private Equity Investor Trends: 2021 Survey Results.

Managers that held final closes on mid-market Europe-focused funds recently include PAI Partners, which wrapped up fundraising early this month for its debut mid-market fund on about €920 million. HIG Capital gathered €1.1 billion in November for its third buyout fund focused on lower-mid-market companies in Western Europe.

Europe-focused funds in market were targeting $81.5 billion as of 1 January, according to PEI’s full-year 2020 fundraising report.