Waterland makes a splash

Fundraising can be a lengthy process. So for Waterland Private Equity Investments to hold a first and final close on €2 billion for its seventh fund less than two months after launch was no mean feat.

The oversubscribed Waterland Private Equity Fund VII, which will target mid-sized companies in northern European growth markets, held a final close in August, having accrued an “extensive list” of investors wanting to up their commitments and fresh investors wanting to gain first-time exposure, says Mounir Guen, chief executive of MVision Private Equity Advisers, which helped place the fund.

Such demand comes as little surprise: the performance of some of Waterland’s previous vehicles led to the firm being judged the best performing private equity firm in the world in January by Oliver Gottschalg at French business school HEC alongside Dow Jones. The basis for the assessment was the performance of each fund measured in terms of IRR, DPI (cash-only return multiple) and TVPI (a return multiple that considers accounting values of ongoing investments). Waterland scored 1.92 on the metric, significantly higher than the second placed firm at 1.32.

The latest vehicle is almost double the size of its predecessor, a €1.25 billion 2015-vintage. That fund attracted commitments from limited partners including State of Wisconsin Investment Board and Danish fund of funds ATP Private Equity Partners. ATP sits on Waterland’s advisory board and has committed around €300 million in total across its previous funds.

“[Waterland] is the only GP in our portfolio where we have re-opted five times,” Torben Vangstrup, managing partner at ATP PEP, tells Private Equity International. “From a performance point of view they have been doing really well. I have seen other buyout groups doing some buy-and-build work, but I have never seen it done as consistently and systematically as Waterland has been able to do over the years.”

The firm has made 400 investments to date, focusing on four sectors: leisure and luxury; ageing population; outsourcing and efficiency; and sustainability. Its portfolio is predominantly Dutch and Belgian, with Germany and Poland also represented.
WPEF V, a €1.13 billion 2011-vintage, had achieved a 2.1x multiple of invested capital and 39.4 percent net internal rate of return as of September 2016, according to online private equity marketplace Palico.

Waterland funds are also in high demand on the secondaries market. Data released by Palico in mid-August showed stakes in Waterland’s 2011-vintage Fund V traded at a 13 percent premium to net asset value in the preceding six months, the second-highest price paid for fund stakes tracked by the group.

“The fundraising market is currently very competitive and you have a group here that has been able to deliver results,” Vangstrup says. “No one knows if they can continue, but historically they have been able to deliver, and I think for that reason they may have been high on new or non-existing LPs’ radar screens.”

Waterland uses a targeted pre-selection system to sift through its potential LPs, Guen says. Once partners are selected, the firm takes an “energetic” approach to managing aspects of the fundraise from diligence to legal discussions and know-your-customer processes.

“It means that investors can move much faster and it’s also a much cleaner approach,” Guen says. “Things that normally would take three to five months to work through, because of the way it’s executed, are done in three weeks.”