UK’s Advantage Capital launches fund 2

Advantage Capital, the London-based private equity firm that targets complex lower mid-market buyouts, has launched its second fund with a £30m target and £50m cap.

London-based investor Advantage Capital has launched its second fund, Advantage Capital Partners 2. It is aiming to achieve a first closing within the next six months and then a final closing of £30 million (€43 million; $56 million) – capped at £50 million – in around a year’s time.

The fund, which is structured as a 12-year UK LP, has set a minimum subscription for institutional commitments of £2 million, while other investors, such as high net worth individuals, will be treated “on a case by case basis”. Advantage Capital is receiving financial advice from KPMG and legal advice from DLA on the fundraising, but is not using a placement agent.

The fund is the successor to the firm’s first fund, which was launched in early 2001 and achieved a final closing on £10 million in September 2002. Advantage Capital joint partner Martin Bodenham told PrivateEquityOnline the first fund has completed four deals and is “over 50 percent” committed. It recently completed the buyout of QM Group, a provider of queue management systems to UK high street retailers.

Advantage Capital targets deals that do not attract mainstream private equity funding for various reasons including: an unfavourable sector, a lack of verifiable historic financial data, gaps in the management team or a tight deal timetable. It will invest up to £7.5 million in any one deal and aims to make one to two investments per year.

In a statement, Advantage said it expected family offices to constitute around 30 to 40 percent of new fund commitments. “The closer we get to high net worth individuals, the more we find they like our unusual strategy,” said Bodenham. Fund of funds are expected to account for 20 to 30 percent of the total, with institutions such as banks and pension funds making up the balance.

Bodenham said Lloyds TSB, which was the cornerstone investor in the first fund and accounted for £7.5 million of the £10 million total, will not be taking a cornerstone role in the successor.

“The market is absorbing our message that, for complex UK deals of between £5 million and £30 million, we’re pretty much the only game in town,” Bodenham told PrivateEquityOnline. “Those firms that target similar types of situations are increasingly putting out substantial amounts of equity.”

Bodenham and Trevor Jones are the joint partners of Advantage Capital. Bodenham was a corporate finance partner at KPMG and Ernst & Young, having also had spells at Close Brothers Private Equity and 3i, while Jones was chief executive of UK private equity firm Gresham.