Steadfast holds first close on €220m

The vehicle has a target of €250m and a hard-cap of €300m, which the GP is expected to reach before the end of the year.

The raise is understood to have picked up pace as Fund III returns have increased following the divestment of road safety services provider AVS Verkehrssicherung to Triton Partners in November last year. Steadfast generated a multiple of 10.7x on the sale, which has corresponded to a fund-level return of 2.1x and 150% DPI, with five portfolio companies remaining. A person with knowledge of the matter told Unquote that the GP is expecting to return up to 3x to investors following further divestments.

The new fund size represents a significant increase on Steadfast Capital Fund III, which held a final close on €128m in June 2011 against a €250m target. Fund III closed with the help of a €104m stapled secondary when ING sold its stake in Fund II to a consortium of investors that also committed capital to the new vehicle.

Steadfast approach
Steadfast's founding partner Nick Money-Kyrle explains that having a larger fund will mean doing more deals. "There are three options for lower-mid-market German GPs: one is don't grow, but if you decide you do want to grow you can either go up in deal size or get more people on the ground and do more deals," he says. "We have a clear idea of what we want to do with Steadfast. There is space to grow in the lower-mid-market and while smaller deals are more people- and time-intensive, doing more transactions at reasonable multiples and building the platforms through acquisitions is more likely to deliver value."

Like its predecessor, Fund IV will invest in businesses with enterprise values between €20-150m. Money-Kyrle explains Steadfast's niche in this section of the lower mid-market: "Lack of market transparency and the relatively high volume of potential targets equals value in this market. The bigger pan-European funds that would like to access that value often don't have the resources on the ground or the contact network to generate proprietary access to dealflow."

The firm is also keen to avoid the high entry multiples seen in other parts of the market. "We are not fighting purely on price. The main problem with competing in a wider auction is you get pushed on timing and are then less able to clarify issues and explore structures that would actually be more beneficial to all parties."

The fund will make between 8-10 platform investments and approximately the same number of bolt-ons. It will continue to focus on the DACH and Benelux markets, although Money-Kyrle does not rule out further geographic expansion in the future: "Nordic investors had to come down south because they raised a huge amount of money and the funds have outgrown their home market. There is plenty of opportunity in Germany for the next few years, but were we to start to move into new geographies I think we would go east to countries such as Poland, where the private equity industry is less mature."

On the road
The current fund's strategy has been well received by LPs, says Money-Kyrle: "Investors are worried about markets overheating on pricing and therefore look for more niche strategies where there's less competition; the fact is that lower-mid-market country funds can access dealflow at attractive multiples."

The majority of commitments to the first close come from European institutions and international funds-of-funds, with a sizeable amount (believed to be €80-100m) from US investors.

A group of high-net-worth individuals has committed and a German bank has indicated its willingness to join at the next close. Outside of that, German investors are under-represented in the fund at this stage. It is also expected that the vehicle will shortly receive the backing of a sovereign wealth fund.

The fund is registered in Luxembourg. Legal advice is provided by Dechert, fund administration services by SGG Group, and Northern Lights Alternative Advisors is acting as placement agent for the raise.

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• Topics
• Funds
• Buyout
• DACH
• Steadfast Capital GmbH
• Germany