Waterland: buy and build ‘consistency’ behind €2bn fundraise

The Dutch manager’s systematic approach to buyout investing helped drive its latest fundraise, which wrapped up in two months.

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.

On Monday the Dutch firm announced it had held the final close, oversubscribed, on its Waterland Private Equity Fund VII. Waterland will use the vehicle to target mid-sized companies in Northern European growth markets and accrued an “extensive list” of investors wanting to up their commitments and fresh investors wanting to gain first time exposure, according to 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 to all of Waterland’s prior funds.

“[Waterland] is the only GP in our portfolio where we have re-opted five times,” Torben Vangstrup, managing partner at ATP PEP, told 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 current portfolio is predominantly Dutch and Belgian, and Germany and Poland are also represented. WPEFV, 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 data from online private equity marketplace Palico.

Waterland has enjoyed consistent growth in its fund sizes, with the vehicles climbing exponentially from the €49.5 million WPEF1 in 2000.

The firm’s funds are also highly in 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 online private equity marketplace.

“The fundraising market is currently very competitive and you have a group here that has been able to deliver results,” Vangstrup said. “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.”

With investors clamouring to take advantage of Waterland’s attractive returns, the firm is able to filter potential commitments to reach its desired geographic exposure. Fund VII attracted 42 percent of its commitments from the US, while Europe, Asia-Pacific and Middle Eastern investors accounted for 40 percent, 12 percent and 6 percent respectively.

Public pension plans represented the largest proportion of investors, with Los Angeles County Employees’ Retirement Association, Massachusetts Pension Reserves Investment Management Board and Texas County and District Retirement System each committing $50 million, according to PEI data. Japanese investors represented a greater proportion than in previous funds.

Waterland uses a targeted pre-selection system that enables it to sift through its high volume of potential LP investors, Guen said. Once partners are selected, the firm takes an “energetic” approach 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 added. “Things that normally would take three to five months to work through, because of the way it’s executed, are done in three weeks.”