Golding aims to raise EUR 350m for next buyout co-investment fund amid ‘unprecedented’ dealflow

“We’re seeing a huge amount of co-investment and secondaries activity at the moment, it’s unprecedented in my 12 years as an LP at Golding,” said Boege. “If you’re in a position to be able to deploy capital, these are very good opportunities, albeit against a challenging economic backdrop.”

The firm sees “truly exciting” prospects in companies with defensive business models and strong growth opportunities but will be able to transact at slightly lower valuations than two years ago, with “more conservative capital structures”, he added.

Golding Buyout Co-Investment 2023 is expected to hold a first close at the end of 2023 or in Q1 2024 but will be deploying capital from summer 2023, Boege said.

“We’re quite positive that we have good early momentum with the fund,” Boege said. “German pension funds are some of the core clients for our product and this is an area where we see some of the strongest demand for both co-investments and secondaries.”

The new vehicle is classified as Article 8 under the EU SFDR, according to a press release.

The firm’s previous co-investment fund, Golding Buyout Co-Investment 2020, held a final close in December 2022 on EUR 273m. It will finish building the portfolio by summer 2023, by which time it will have made 26 investments, according to the same press release.

Investors
The sponsor typically receives commitments from German institutional investors for its strategies. “We are trying to move abroad with this product – we have been historically strong in the German market, and we still are, but now we have clear ambitions to grow outside this as well,” said Boege. "Any international investors will be new and will want to see support of existing LPs first."

The minimum commitment for the fund is EUR 10m.

Investments
The fund will follow the strategy of its predecessor, aiming to build a portfolio of small- and mid-cap companies with enterprise value of up to EUR 1bn. The vehicle will deploy equity tickets of EUR 15m-EUR 20m and will deploy most of its capital in Europe and North America.

The fund targets fast-growing sectors including technology, software, healthcare and B2B services. It will focus on growth through buy-and-build strategies, seeking to build a diversified portfolio of 25-30 deals.

“Many GPs [general partners] are capital constrained or reserving capital,” Boege noted. “They are happy to write slightly smaller tickets, leaving room for one or two deals in the fund, to avoid avoiding having to go out in this brutal fundraising market. People don’t have the funds they need but don’t want to move out of the space where they have the networks and deal-flow.”

The firm sees around 250 deals per year, around 60-70% of which make it into a private equity portfolio, Boege said. This stands in contrast to the roughly 400-500 deals typically reviewed by a PE firm, 20-30 of which will be selected. “So, we have a very different funnel in terms of quality, and we can select these deals with the best owners,” he said.

The firm is open to new co-investment relationships and is seeing several GPs reaching out to establish these, but it will approach these opportunities selectively. Although stapling a co-investment to a primary commitment is challenging for Golding, given that these come under different vehicles and there is a potential conflict of interest, Boege acknowledges that “it’s the start of the relationship.”

Looking closely at who the deal lead will be “is a critical part of our DNA”, said Boege. “We would always have a preference for the people we know and trust and have been investing with for decades, but having said that, we will always speak to GPs who have an exciting opportunity and will get back to them with an answer quickly – it’s hard enough to get a deal across the line, you don’t want a co-investor toying with it.”

Alignment is also crucial to Golding’s selection criteria, with the firm seeking “full alignment with the underlying GP” as well as “a typical investment period horizon and equity story” said Boege. “We want the GP to be appropriately incentivised, we look at the base case and, if it comes with fees but is attractive enough, we build this into our returns.”

The predecessor fund made its first realisation in the form of HRworks, an HR software platform that was transferred to a continuation fund earlier this month by majority owner Maguar Capital, as reported. 

People
Golding Capital Partners – Daniel Boege (head of buyout).

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