Since the Brexit referendum, there has been an air of uncertainty around British private equity. Though there were other, case-specific reasons, it undoubtedly played a role in the decision of Lyceum Capital to pull fundraising for its fourth fund and switch to a deal-by-deal investment model, leading in turn to the departure of seven partners.
The firm’s previous fund, the 2013-vintage £330 million ($420.6 million; €370.6 million) Lyceum Capital III, counted names such as AlpInvest Partners, New York State Teachers’ Retirement System and University of California Regents Endowment Fund among its investors.
Few would have predicted when the decision was made in January that by the end of the year, Lyceum, or at least some of the people behind it, would be back in business with money to spend.
In October, a team led by former-Lyceum managing partner Jeremy Hand and partner Simon Hitchcock announced the formation of Horizon Capital, a firm targeting European technology and business services firms.
The firm will make investments of between £10 million and £50 million in high-growth opportunities in the UK and Northern Europe, with a particular focus on buy-and-build strategies. Just before it was unveiled the firm closed Horizon 2018, a seven-year, £200 million investment vehicle backed by Pantheon, Idinvest Partners, Lombard Odier, HQ Capital and EQ Asset Management.
“Significant dry powder is available to continue to support the growth plans of all portfolio companies including further planned add-on acquisitions,” the firm noted in a statement.
The rebirth was particularly innovative. For a start, the new fund has a two-year investment period and five years for realisations, meaning quicker distributions for investors.
Second, Horizon’s backers participated in a tender offer on the 2013-vintage Lyceum Capital III, buying stakes from limited partners that wanted to exit and making a stapled primary commitment to Horizon 2018. Distributions from Fund III will be routed into Horizon 2018 and reinvested in portfolio companies as part of a secondaries process engineered by advisor Rede Partners.
The deal was a good example of how primary and secondaries private equity can combine to create solutions for even the most challenging situations.