August Equity hits £200m hard-cap for Fund III

The vehicle hit a £100m close in June 2013.

August Equity Partners III was significantly oversubscribed and received interest for up to £300m. However, the firm was keen to stick to its agreed hard-cap to avoid altering its strategy and moving into larger deals. This meant August had to reduce investor allocations, and in some cases, even turn investors away.

The outcome belies the difficult fundraising backdrop; despite the reduction in traditional investor sources, unquote" has recorded myriad raises claiming to beat targets, and doing so fairly swiftly. Rather than suggesting an easy ride, August managing partner Philip Rattle is quick to point out how much effort is truly required: "We've been warming up investors since 2010. Fundraising is a full-time and ongoing exercise now more than ever. Gone are the days of a road-show six months prior. We're already thinking about Fund IV."

Indeed, August needed to extensively diversify its investor base since, unlike some other mid-market successes such as Graphite Capital, 40% of its existing LPs were unable to re-up. Says Rattle: "We got as far as we could with existing investors at first close, while at the same time meeting with new prospects."

The first close is obviously crucial to showcase the allure of any fund to prospective backers, but balancing this momentum with visibility on deals can also prove beneficial. For example, Fund III has made two investments to date, both of which are proprietary, according to Rattle. Its first was London-based schools group Minerva Education, which saw August pump a reported £25m into the business it had been tracking for a number of years. Most recently it backed Essex-based care home operator Old Deanery Care Village. 

Another two are scheduled to be announced this month, meaning incoming investors had visibility on where around 40% of the fund would be put to work.

LPs are asking more questions too, adding more time pressure to decision-making. "'Do you want a quick no or a long yes?' is what we heard a lot," Rattle explains.

Once the fund had reached its first close and gained momentum, August was then tasked with creating the optimal investor base. LPs were taking time to make their decision, but so was August. The GP was keen to ensure that it had an affinity with investors – that LPs would be able to add something to the fund.

Investors in August Equity Partners III are understood to include Partners Group, JP Morgan, Akina and PPM Managers. The GP's refreshed investor base showcases a UK mid-market fund able to attract an impressive amount of cash from overseas.

August's first fund has achieved a realised return of nearly 3x to date and its second fund has already completed two exits and paid back almost half the fund's committed capital.

According to unquote" data, August sold UK domiciliary care provider Enara to listed trade player Mitie for £111m in Q4 2012, marking Fund II's first exit. The GP had backed the business in 2008 when it funded a £20m buyout, subsequently growing profits 15-fold and bolting on more than 50 businesses.

The new fund will invest £10-30m of equity in deals in the healthcare, education, technology services and business services sectors. According to unquote" data, this is in line with the firm's previous fund, which raised £155m at its July 2008 close.

August was advised by placement agent Amala Partners.

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