Triton closes smaller mid-cap fund on €448m

Oscar Geen
10 July 2018

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Triton Partners has held a final close for Triton Smaller Mid-Cap Fund (TSM) on €448m after raising its hard-cap.

The fund was initially launched in January 2017 with a €350m target and a €400m hard-cap, and held an interim close on €130m in June 2017. The hard-cap was subsequently removed with the agreement of LPs and a final close held on €448m at the start of July.

Triton's Andi Klein explained how the firm prepared to launch a new strategy: "We started assembling the team about a year prior to the official launch. We are now nine investment professionals and will be 11 by autumn. I recruited both internally and externally to ensure we had the right combination of expertise to execute the strategy."

A panellist at Unquote's private equity conference Allocate likened raising a smaller fund as a larger manager to "bringing a gun to a knife fight", but Klein was more measured, he said. "Raising a smaller fund as a larger house has the advantage of deploying the back office, knowledge and capacity of a larger house. That said, we need to demonstrate to LPs that the team is able to operate well in this space, where the skills set is quite different from the upper-mid-market."

The new vehicle will target the same sectors as Triton's larger funds, namely industrials, business services, consumer and healthcare. However, it will invest in businesses with enterprise values between €20-150m with an average ticket size of €35m. Said Klein: "To win deals in the lower-mid-market you need to partner with families and entrepreneurs, and this requires a certain emotional intelligence."

This addresses a concern sometimes expressed by LPs about managers raising smaller secondary strategies, that they will bring the approach that works in their core strategy to a part of the market where it does not. For this reason it was important to Klein to have impudence, while still making the most of the benefits of being a large manager: "The TSM investment team is a fully staffed, dedicated team, and therefore invests completely independently from the other investment teams. However, we share other resources including the operational teams, sector experts, digital functions and purchasing platform, and of course put a lot of emphasis on cross-sharing expertise between investment professionals across our different investing strategies."

Investors
TSM's LPs have an overlap of about 50% with its other funds. Klein said that many investors that are specifically focused on the lower-mid-market committed, that have not backed Triton funds before.

The largest LPs in Triton Fund IV included Canada Pension Plan Investment Board, Washington State Investment Board and California State Teachers' Retirement System, according to Unquote Data.

Investments
The new fund is currently 30% invested across four platforms, Akeab, Univativ, BFC and Unident. It expects to make 10-11 investments in total.

It will target the same geographies and sectors as the larger Triton funds, investing in companies headquartered in DACH and the Nordic region that operate in the industrials, business services, consumer and healthcare sectors.

People
Triton Partners – Andi Klein (investment partner).