Lyceum pulls fundraising, switches to deal-by-deal – exclusive

The UK mid-market investor has decided not to proceed with raising its fourth fund in the face of LP challenges.

UK mid-market investor Lyceum Capital has decided to stop fundraising for its fourth fund and instead switch to a deal-by-deal strategy, Private Equity International has learned.

Lyceum began informal discussions with investors about raising £375 million ($507 million; €425 million) for Fund IV in mid-2017, but fundraising proved tougher than expected, according to a source familiar with the matter.

The firm declined to comment.

A significant number of Lyceum’s LPs were unable to commit to the new fund due to their own internal issues, the source said. A number of international LPs are also taking a more cautious approach to the UK in the aftermath of the Brexit vote.

The firm’s previous fund, the 2013-vintage £330 million Lyceum Capital III, counts AlpInvest Partners, the European Investment Fund, New York State Teachers’ Retirement System, and University of California Regents Endowment Fund among its investors, according to PEI data.

There are 11 unrealised assets in that fund, currently valued at 1.5x cost. It is understood the majority of the fund was invested in the last two years.

The firm has exited seven investments from its previous fund, a 2008-vintage £255 million vehicle, which have generated a 2.6x return on capital invested.

As a deal-by-deal investor, Lyceum will look at a broader range of opportunities, including deals outside the UK, deals that are both smaller and larger than the firm’s traditional remit, minority deals and those requiring longer-term capital, the source said. It will continue to focus on technology and tech-enabled services businesses.

The firm is expected to work with a number of its existing investors as well as new partners.

Co-founder Jeremy Hand will continue to lead the team together with Simon Hitchcock, who will join him a co-managing partner. The firm will operate with a leaner team, the source said, although which executives will depart is still unknown.