Electra strengthens relationship with Steadfast

Typically associated with backing buyouts, the investor has bought out a tranche of a secondary position in Steadfast’s second fund for €26m. The move gives Electra a piece of the fully invested €193m Steadfast Fund II. Simultaneously, Electra has also announced a cornerstone commitment to Steadfast Fund III, which is fundraising now with a €200m target.

Secondary transactions are not new for Electra however. In 2008 Electra was introduced to the German GP and learned that a significant LP in Steadfast Fund I was looking for an exit. Electra acquired the stake for €36m, repaid two years later when MPS, the largest in a portfolio of 13 in the fund, was sold in August 2010, netting proceeds of £34m for Electra.

Electra is looking to mirror the success of its investment in Fund I through its new deals. The second Steadfast fund comprises of five companies, the largest being automotive connector manufacturer FEP, equipment manufacturer Kautex and clothing distributor Falk & Ross. Having a flexible investment approach is beneficial according to Charles Elkington, investment partner at Electra Partners: “One of the core strengths of Electra is that our investment mandate is broad, which means that we can invest capital where we see the best return on a risk-adjusted basis.”

Investing in a fund through a secondary transaction and committing to a new fund offer different risk profiles however. “There is a material difference between the investment in Fund II, where the companies are known and thorough due diligence can be completed, and Fund III, which is an open ended commitment fund,” says Elkington. This is where Electra’s historic relationship with Steadfast, the returns from Fund I and performance of companies in Fund II provides a sufficient basis for confidence in the cornerstone commitment.

Creating partnerships with European mid-market buyout houses is part of Electra’s strategy and leads to a number of benefits such as co-investment opportunities and cross-border knowledge. The buyout of Daler-Rowney, which was introduced to Electra by French partner TCR Capital earlier this year, is just one additional example of how these partnerships can add value.

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• Topics
• DACH
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