Montagu readies €2bn Fund IV

The firm is approaching the 75% invested threshold for its third fund, for which it received an investment period extension from LPs earlier this year.

Montagu Private Equity is pre-marketing its fourth fund, which will target €2 billion with a hard-cap of €2.5 billion.

That amount would be in line with the firm’s third fund, which collected about €2.3 billion in 2005.  

Montagu declined to comment. This week, the firm received a €60 million commitment from Massachusetts' state pension.

Montagu’s third fund will be more than 75 percent invested once the firm completes the €222 million acquisition of Host Europe Group from AIM-listed turnaround investor Oakley Capital, according to market sources. The Host Europe deal was announced in September.

Montagu received an investment period extension for Fund III from limited partners earlier this year, one firm among many in the industry that asked LPs for more time to finish investing older funds. Several sources told PEO LPs have been happy with Montagu's performance, especially since the firm has distributed about €1 billion in the past 12 months.

One LP in Fund III told PEO Montagu took the “prudent” approach in securing the extension to make sure the firm was not completely out of the money when entering fundraising for Fund IV.

“No manager likes to be completely out of investment capacity and therefore out of the market,” the LP said. “With fundraising back to a more normal pattern of taking some months to get to a first close and then six to 12 months to reach final close, you can imagine they could be out of the market for new deals for up to 18 months, which would not be good.

“Montagu is one of several funds that requested an extension to preserve their capacity to make new investments while they raise their next fund,” the LP said. “It is generally a prudent approach given that investors should not want a manager to be under pressure to invest, which could happen if an extension was not granted.”

Fund IV will target buyouts of mid-market companies with enterprise values of €100 million to €1 billion across Northern Europe. The firm backs incumbent chief executives in businesses that produce products or services “that would be badly missed if the businesses were to not exist”, according to pension documents from Massachusetts describing Fund IV.