Lyceum poised to launch new fund

UK lower mid-market firm Lyceum Capital is about to launch its latest fund with a target of around £275m.

Lyceum Capital is poised to begin fundraising for its latest fund, Lyceum Capital Fund III, with a number on the cover of £275 million (€333 million; $426 million), according to a source close to the process. The fundraising is likely to begin formally by the end of the first quarter, the source said.

The London-headquartered group has deployed about 85 percent of its last fund, which raised £255 million in 2008, the source said. Lyceum Capital Fund II has made nine platform investments to date, and the firm expects to make one or two other platform acquisitions and further bolt-ons, according to chief operating officer and partner Andrew Aylwin.

The firm declined to comment on the new fundraising.

Macfarlanes’ fund formation team is working on the fundraising, while Lazard is acting as placement agent for the fund.

Investors in the firm’s current fund included AlpInvest Partners, AXA Private Equity, the European Investment Fund, F&C Asset Management, GIMV, AP Fonden 2, Dancap Group and Access Capital Partners, according to research group Private Equity Connect.

Lyceum was founded in 1999 by Jeremy Hand and Philip Buscombe, who is now the firm’s chairman. Formerly a captive entity of German bank WestLB, which seeded its first fund, AlpInvest and AXA Private Equity sponsored the group's spinout. It targets deals in the £10 million to £75 million equity value range, a segment of the market Aylwin regards as offering “excellent long-term” investment opportunities, “for those who know how to access them”.

“With the right industry insight and a focused origination model, the lower mid-market offers a consistently high number of new investment opportunities regardless of the macroeconomic conditions,” he said in an interview with Private Equity International. “Our returns are predicated on identifying and mapping markets with potential for significant expansion, and driving consistent revenue growth at our portfolio companies through informed and focused transformation programmes, not financial engineering.

“We’re about delivering low beta returns to investors. We achieve this consistently by driving operational enhancement and organic growth that is also accelerated with add-on acquisitions. Building enterprises of scale with a clear strategy also brings scope for pricing arbitrage on top of that. We target three times our money on every deal – this sets the bar high but, with the right model, can be delivered consistently.”

The firm took a proactive approach to recruitment in the wake of the economic downturn and has grown its investment team from nine to 16 investment executives over the last three years. It is understood to be looking to make two further hires – one in an operational role, the other on the investment side.