Permira has held a first close on its fifth global buyout fund after 19 months of fundraising.
In a letter to investors on Wednesday night, the firm said that it had raised €2.2 billion for the vehicle, which is targeting €4 billion to €5 billion. The total includes a GP commitment of €200 million. It now has another 12 months to get to its final target.
Permira declined to comment.
The buyout firm initially started marketing the fund in September 2011 with a target of €6 billion. However, the fundraising failed to gain traction with LPs, partly because Permira IV had only just got back to par after a series of write-downs following the financial crisis, according to a source familiar with the fundraise.
But performance has since improved: valuations across the portfolio climbed 19 percent in 2012, while the firm generated about €3.4 billion in exit proceeds. Permira IV was up 10 percent in the first quarter of 2013 and is now valued at about 1.34x cost, according to the letter sent to LPs.
This improved performance – coupled with the decision earlier this year to reduce the fund target to between €4 billion and €5 billion – eventually allowed the firm to build some momentum on the fundraising trail, according to one investor in the fund. Permira also offered early-bird discounts to LPs willing to commit before the first close, an increasingly common practice.
The source said Permira V has a more diverse LP base than the previous vehicle, with about a third of the capital coming from outside Europe and North America (mostly Asia and the Middle East), a much higher proportion than for the previous fund.
In the letter, co-managing partners Kurt Björklund and Tom Lister told LPs that the firm had received “strong backing … from existing and new investors … giving us a good platform for the rest of the fundraising. The new fund will start sourcing opportunities immediately in what we think is a highly interesting environment with a declining supply of capital in an increasingly target-rich marketplace.” They added that the new fund would focus on “finding primary and proprietary opportunities to acquire businesses with resilient growth and potential to globalise their revenue base”.
Recent Permira deals include the exit of Italian ceramics business Marazzi and a €250 million investment in fish vaccine business PHARMAQ, both in April. It also bought US genealogy website Ancestry.com in October and Japanese sushi chain Akindo Sushiro in August.
The firm was founded in 1985 as a series of country specific businesses under the Schroder Ventures brand. The firm maintains offices in Frankfurt, Guernsey, Hong Kong, London, Luxembourg, Madrid, Menlo Park, Milan, New York, Paris, Stockholm and Tokyo. The new fund will be less than half the size of its previous vehicle, which raised €11 billion in 2006 and was subsequently scaled back to €9.6 billion.
Clare Burrows contributed to this report