PAI eyes December first close for €4bn flagship

Details of the fund’s terms were revealed in documents prepared for Pennsylvania Public School Employees’ Retirement System.

PAI Partners is looking to hold a first close for its seventh flagship buyout fund in December, according to documents prepared for a US pension and seen by Private Equity International.

The firm, which is targeting €4 billion, also expects to hold a final close on PAI Europe VII in Q1 2018, documents by advisor Hamilton Lane prepared for Pennsylvania Public School Employees’ Retirement System’s 8 September investment meeting show. A hard cap for the fund has not been established.

The Paris-headquartered firm will commit at least 2 percent of the total fund size to invest in or alongside the fund, according to a letter from Portfolio Advisors to the PSERS board of trustees which recommends the pension commit up to €125 million to the new vehicle.

PAI Europe VII is expected to target approximately 15 to 17 investments of between €150 million to €400 million in European upper mid-market companies, the letter noted. The fund may also make investments in temporary financing instruments, such as bridges, according to the investment documents.

The firm anticipates that equity will account for around 30 to 50 percent of the initial capital structure of each of its portfolio investments. The fund will also employ a capital call bridging facility.

PAI VI, a €3.3 billion 2015-vintage, had generated a 41 percent distributions-to-paid-in multiple, a 19.2 percent net internal rate of return and 1.4x net multiple of cost as of 30 June, a source familiar with the fund told PEI. PAI has a realised performance of 2.6x MoC and a 29.7 percent gross IRR since inception across all of its funds as of 30 June.

The firm has completed 10 exits above 2x MoC from its last two funds, of which five achieved at least 3x MoC.

The latest fund could signal a return to pre-crisis form for PAI, which in 2009 was forced by LPs to slash its €5.4 billion fifth buyout fund to €2.7 billion after the departure of chief executive Dominique Mégret and senior partner Bertrand Meunier triggered a key-man clause event. The pair were ousted in what some investors regarded as a “coup” following months of lobbying by Lionel Zinsou, who replaced Mégret at the firm’s helm.

PAI declined to comment.