PAI Partners collects nearly €1bn for debut mid-market fund

PAI Partners has held the final close on its debut mid-market fund after formally launching in April last year without any in-person meetings.

The Paris-headquartered buyout firm gathered about €920 million against a €700 million target for PAI Mid-Market Fund, according to a statement seen by Private Equity International. The vehicle had an original hard-cap of €800 million, which the firm increased to €900 million following greater LP interest.

Fifty investors – both existing and new – committed capital, including public and private pensions, sovereign wealth funds, insurance companies and family offices, according to the statement.

Rabobank Corporate Investments is an investor in the vehicle, according to PEI data.

Around one third of the mid-market fund’s LPs are new relationships, Richard Howell, a managing partner at PAI, told PEI. The firm held a first close on €500 million in July, he added.

“The mid-market fund is a platform extension, not a diversification in strategy, or PAI moving into anything different,” Howell told PEI. “The very nature of our mid-market fund isn’t really to just move into a smaller market. It was to bring all of what PAI offers – a central infrastructure, local teams, our portfolio performance group and a strong commitment to ESG – and layer that into the mid-market.

“We go to a company with ambition to grow cross-border and say, ‘we can help you do that, we’ve got the team and sector knowledge to help you do that’.”

Capital from the fund will be invested across PAI’s core sectors business services, food and consumer, industrials and healthcare.

The firm has deployed about 22 percent of the fund across three deals thus far – the take-private of French orthopaedic surgical specialist Amplitude Surgical; acquisitions of Spanish seafood company Angulas Aquinaga; and European flower and gift digital platform MyFlower. Howell said all the deals were done on “a one-to-one discussion with the owners, without any formal banking process”.

Along with the Mid-Market Fund, PAI is also deploying its latest Europe buyout vehicle, the €5.1 billion, 2017-vintage PAI Europe VII, according to PEI data.

Asked about the investment selection process, Howell noted the mid-market fund and buyout teams are “able to leverage off each other’s knowledge and have a clear line as to the types of deals and deal sizes”. Ticket sizes for MMF are at least €70 million, he noted. PAI’s transactions for its large-cap funds generally focus on European companies with revenue of €100 million to €1.2 billion, according to an investor document.

Howell declined to provide details on terms. He noted that the GP commitment, management fee and carry structure are similar to the firm’s previous funds.

On the overall fundraising environment, Howell noted that firms that are coming back to market, especially those with an established platform and track record, will do so with a high degree of confidence that 2021 is more favourable. “LPs don’t want the pandemic crisis to allow them to miss a vintage.”

He added that continuation funds as well as minority stake vehicles will keep growing.

“Most continuation funds started off as a technical way to end an old fund, but they have morphed very quickly for GPs like ourselves with premium top-quality assets to hold them a bit longer, and also do the best of our fiduciary duty, which is to offer a liquidity option to our investors at the right time,” Howell said.

“In that context, we’re big supporters of it… and think it will be a permanent feature of the market.”

Private equity funds gathered $535.2 billion last year, a decline of 19 percent from 2019 due to the resulting downturn from the pandemic, according to PEI‘s full-year 2020 fundraising report.

Rede Partners advised on the fundraise.