Analysis

Video: Dunedin’s Middleton on UK mid-market challenges

Source: UK unquote | 05 Feb 2014 | screening image

Shaun Middleton, managing partner of UK mid-market firm Dunedin, speaks to Kimberly Romaine about diversifying investor bases and the challenges facing this market segment.

Following its successful fund close in July 2013, reaching £300m for its third vehicle, Dunedin managing partner Shaun Middleton discusses European and US investor attitudes to UK private equity while out on the road.

This latest vehicle was tasked with diversifying its investor base as many of its previous LPs were banks or funds-of-funds that were no longer able to commit to the asset class. The buyout house, aware of the challenging fundraising market, crucially secured two international trade exits before going out to potential new investors. Dunedin exited WFEL to a trade buyer for 2.4x money in May 2012 and in the same month sold Capula to Dutch trade buyer Imtech.

According to Middleton: "We knew the market was tough even before we secured those exits but, when we launched the fundraising process, the perception of the UK had changed."

As well as receiving re-ups from around 50% of existing investors, Dunedin also attracted new investors from Europe and the US. "We had to go out to new markets and received strong interest from French and German investors. We also secured our first investment from a Nordic LP."

As appetite for UK and European private equity in the US had remained poor, Dunedin did not look across the Atlantic until it had reached a first close. "After a successful first close where we had reached over 60% of our target, we went over to the US at the beginning of 2013," explains Middleton. "The perception of the UK had changed in that period and those investors that were looking further forward understood that the UK was the best place to be if they wanted to be in Europe."

Dunedin has already invested 20% of its new vehicle, having acquired Trustmarque Solutions in June last year and Kee Safety in December.

Dunedin has £400m under management and counts more than 20 institutional investors across Europe. The firm's investment trust is backed by 2,500 institutional and individual shareholders. Dunedin has 16 investment professionals in offices in Edinburgh and London.

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