Newly formed Elaghmore Partners has held a first and final close on its debut fund on £60 million ($76 million; €72 million) after just three months in market, Private Equity International has learned.
At the same time the fund has completed its first acquisition, SB Components, a supplier of bespoke parts and adaptations for commercial vehicles.
Elaghmore is led by Andy Ducker, David Manning and Greg Koral, who have been investing in and operating businesses together for more than 10 years using their own personal capital.
“We started with the first deal and then the second deal, and we've reinvested all those returns back into subsequent deals,” Ducker told PEI.
“A couple of years ago we were getting frustrated with the number of opportunities that were being put to us that we were unable to execute through just limitations in our own personal capital. That drove our decision to start to explore fundraising.”
The fund, which was oversubscribed, is backed by a mixture of US endowments and foundations, and European funds of funds, Ducker said. Elaghmore Partners has committed around £3 million to the fund.
“We were very focused on finding LPs who we feel want to go on the Elaghmore journey with us over not just our first fund but subsequent funds,” he said.
Rede Partners acted as placement agent on the fundraise.
The firm will be looking to make around eight investments, writing a typical equity cheque of between £5 million and £10 million.
“We could have raised significantly more capital, but one of the key requirements for us and indeed the LPs that invest alongside us [is that] David and I and Greg are very hands-on with our businesses,” Ducker said.
“We concentrate on a small number of transactions, one to two a year, in which we can heavily engage and therefore continue to drive the exceptional returns that we've delivered over the past 10-12 years.”
The team has invested in 12 deals together, of which seven have been realised, delivering a 14x return. The five remaining portfolio companies will sit outside the fund.
Elaghmore will target challenged businesses that need investment in management and operational engagement.
“Being able to engage with the assets that we acquire is a really important differential that we see, because our background is not investment managers, our background is operators, we've been CEOs of businesses over our respective careers,” Ducker said.
At the GP level, Elaghmore's team consists of the three partners and three support staff. The firm also works with a group of around 10 executives with whom it has longstanding relationships.
“These are executives who understand how we work, who have worked with us in many cases on multiple transactions, who we will put into businesses alongside the existing management team, and who understand the sort of things we want done.”
These executives are also cut into the equity of the transactions to align interests.
Elaghmore will not invest in property, technology or retail, but would consider opportunities in most other sectors.
“Anything that makes or distributes something would be attractive to us,” Ducker said.
One of the trio's realised investments is specialist food ingredients business Chaucer Food Group, in which they led the executive team, having acquired a 30 percent stake in the business in 2012 alongside HSBC, RBS and BNP Paribas. During the course of their investment, two of those banks were transitioned out and two private equity houses – Endless and Caird Capital – came in. The business has been sold to Japanese freeze-dried food manufacturer Nagatanien and is an exit for all existing shareholders.