Mezzanine Management closes fourth fund on €264m

Mezzanine Management started pre-marketing the fund to existing investors in mid-2016 and formally kicked off fundraising in early 2017 with a €250m target. The GP held a first close later that year on €116m and held further closes until the sixth and final close in November.

"We have been ambassadors for CEE for the last 18 years, and, despite the good macro numbers, it is still hard to get the message across," founding partner and CEO Franz Hoerhager told Unquote. "But while fundraising started a bit slowly, there was a turning point when investors started looking at the numbers, seeing our track record and realising the opportunity – we were especially pleased by the support from local LPs, as well as the commitment from our first major investor in Asia."

The fund is the firm's largest to date. Mezzanine Management previously closed AMC III on €200m in 2012, having launched in 2009 with a €300m target. That vehicle is now fully deployed and more than 60% realised, Unquote understands. AMC II raised €261m in 2008 and the firm's maiden fund was closed on €115m in 2002.

In a first for Mezzanine Management, AMC IV will be based onshore in continental Europe. "We made a conscious decision to domicile the fund and the management company in Luxembourg, as we believe the trend towards onshoring is inevitable," said Hoerhager. "Yes, it might mean higher costs at first, but ultimately it is a very positive move for everyone. Some of our investors may not have come in if the fund was based offshore."

Hoerhager said the fund's terms and conditions remain unchanged from its predecessor's. The firm declined to comment on targeted returns, although Unquote understands they are well into double-digits.

Mezzanine Management retained the services of Paul Hastings London and DLA Piper Luxembourg for the fundraise. It did not use a placement agent, instead relying on head of investor relations Christian Stix to steer the effort. The GP is planning to bolster its in-house investor relations following the fund close.

Investors
AMC IV received commitments from 20 LPs in total. CEE-based investors provided 20% of commitments – these backers include local pension funds, insurance companies and a fund-of-funds. This influx of local capital was partly prompted by recent regulation changes in several countries finally allowing local LPs to invest in PE vehicles, as opposed to forcing a heavy bias towards local listed investments, Hoerhager said.

The European Bank of Reconstruction & Development and the European Investment Fund also backed the vehicle; the former has had a long relationship with Mezzanine Management, having committed €50m to AMC III and acted as a cornerstone investor in the first two funds. In addition, the GP said it secured support from a large Asian investor – the name of the LP remains under wraps for now.

Around half of the committed capital came from LPs in previous AMC vintages, while around two thirds of LPs are new backers.

Investments
AMC IV will continue the strategy of its predecessors, providing mezzanine financing to small-cap and mid-market businesses in central Europe. The fund will deploy around €10-30m per deal and will target a total of 15-18 investments. Mezzanine Management can deploy capital to fund a number of scenarios, from providing growth finance to backing buyouts. Around two thirds of its deals now tend to be sponsorless, marking a departure for the firm, which historically had mostly done sponsored deals.

AMC IV has already made four investments: ATM, Netrisk, Nettle and Optimapharm. It is approximately a quarter deployed and a third committed, with further opportunities in the pipeline. At the current rate, the vehicle should be deployed across a four-year investment period.

People
Mezzanine Management – Franz Hoerhager (founding partner, CEO); Christian Stix (IR head).

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• Mezzanine
• CEE
• Mezzanine
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