Main Capital raises EUR 1.2bn across two funds

Both funds have closed on their hard-cap, according to a statement.

Loyens & Loeff provided legal advice on the fundraise.

Asked about the timeline of the fundraises, Charly Zwemstra, CEO of Main Capital Partners, told Unquote: "Both funds were launched at the same time – we discussed with our existing LPs that this would be the best way to go to the market. The formal launch was around 1 July, so getting to the initial and final close took less than four months."

Main Capital's new Foundation strategy will allow the GP to take advantage of a broader range of market opportunities that come its way. "This had been in the planning for the last year and a half," Zwemstra told Unquote. "We noticed that we were consistently being approached by small and medium-sized software companies who were looking for a partner but did not want to be sold to one of our platforms or to a strategic buyer. So we wanted to raise a specific fund for this."

He added: "In general, these are companies with an above average growth rate, a relatively modern technology platform and a young team. We can support them selectively with add-ons, but the focus is more on organic growth, with add-ons taking place later on."

Main Capital VI held a final close in May 2020 on EUR 564m, having held a first close in December 2019 on EUR 535m. Main Capital V held a final close on its hard-cap of EUR 236m in December 2017.

Main Capital VI expects to make one more platform deal before the GP begins to deploy from Main Capital VII.

As Main Capital has developed its fund sizes and internal organisation, data has played an increasingly important role in the technology-focused GP's deal sourcing. "One of the big growth areas for our firm have been our investments in market intelligence and performance excellence," said Zwemstra. "Our in-house data scientists collect data, KPIs, growth rates, and percentage spend per category in areas such as R&D across companies. We also look at the number of companies in certain product markets, combining data to make the best possible selection of portfolio companies and to find out how to improve them post-closing."

Investors
The Foundation fund and Main VII were oversubscribed by around EUR 200m in total, Zwemstra told Unquote. Main Capital's existing LPs have invested around 60% of the EUR 1.2bn in capital raised across both funds, he added.

The LP base of both funds includes institutional investors from north-western Europe, the US and Asia, including pension funds. The majority of LPs have invested in both vehicles, according to Zwemstra.

LPs in Main Capital VI include fund-of-funds investor Argentum, according to Unquote Data.

Investments
Both the Foundation fund and Main Capital VII each expect to make 12-15 platform investments.

The larger size of Main Capital VII will allow the GP to step up its buy-and-build-focused strategy, according to Zwemstra: "We will make more platform deals from this fund with more emphasis on local and cross-border add-on strategies, creating larger international software groups with add-ons or through combining companies in our existing portfolio."

Main Capital VI made equity investments of EUR 4m-20m with up to EUR 75m available per company for add-ons and follow-on investments, whereas Main Capital VII will write initial cheques of more than EUR 10m, with up to EUR 150m available per platform. Main Capital VII will target companies with enterprise values of EUR 25m-250m.

Main Capital Foundation I will make initial investments of less than EUR 10m, with up to EUR 30m available per company, targeting businesses with an EV of less than EUR 25m and therefore covering the full spectrum of software deals in Main Capital's areas of focus.

Both funds have a strong deal pipeline, Zwemstra told Unquote. "For Main Foundation, we have two letters of intent at hand for new deals," he said. "We are also working on sizeable platform investments for Main VII. We expect to close the first platform investments for both funds in Q4."

Both funds are expected to continue Main's current geographical focus on north-western Europe. "We have an office in Stockholm for the Nordic region, which is a very interesting area for us, plus an office serving the DACH region in Duesseldorf and a Benelux office in the Hague," Zwemstra said. "We are looking for new deals and add-ons in all areas, but we could also do add-ons in the US to strengthen our European platform companies."

The GP does not have a set target for the number of add-ons it makes each time it acquires a portfolio company via its flagship strategy, Zwemstra told Unquote. "The number of add-ons we make per company depends on the strategy and the product market – some are more fragmented than others," he said. "But we expect to close more than 35 add-ons this year and between five and eight new platform deals. We will be aiming for six to eight new platform deals on an annual basis across the two funds."

Main Capital also has a busy pipeline of exits, Zwemstra told Unquote: "We expect to end up with five exits this year. We have just announced the sale of Sofon to TA Associates' Revalize in the CPQ (configure, price, quote) market. We are also working on a number of strategic divestment scenarios in Benelux and Germany."

People
Main Capital Partners – Charly Zwemstra (CEO).

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