Eurazeo expects longer fundraising for flagship Fund V

Min Ho
07 October 2022

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French sponsor Eurazeo is in the midst of fundraising for its fifth flagship buyout fund with a target of EUR 3bn, Marc Frappier, managing partner for its mid-large buyout strategy, told Unquote.

Eurazeo Capital V, which was filed in Luxembourg in April, will look to have a "check-in point" during the course of 2023, he said, without elaborating on the timeline for a potential close. The EUR 3bn target will be partly funded by its balance sheet.

The fund will be slightly larger to the incumbent Eurazeo Capital IV, which held its final close in July 2019 at EUR 2.5bn after a year and half of fundraising.

With a mandate to invest around EUR 300m in equity cheques per company, the vehicle has so far deployed 20% of the EUR 3bn that it expects from the fundraising via deals including French veterinary clinic chain Sevetys and US infant plagiocephaly treatment provider Cranial Technologies.

But with an increasingly uncertain economic environment, the Paris-based firm acknowledges that the fundraising cycle is likely to take longer, he said.

"Certainly, we are in a market where a lot of investors are thinking twice before they make a commitment," he said.

Hesitancy is further compounded by the denominator effect, with LPs having to rebalance their illiquid portfolio allocation in light of the fall in their equity and bond holdings, he said.

Despite the uncertainty, it remains confident of its fundraising process, noting that its selective pickings in companies across healthcare, financial services, business services and consumer across Europe and North America will continue to attract LP attraction, he said.

"Those sectors are where people want us to be in – they see the resilience of those sectors, operating model, and they are driven usually by some form of recurring revenue, high demand or predictable demand patterns," he said.

The soaring economic mood is also reflected in the M&A market, he said, with banks becoming more cautious on lending. Additionally, investors are finding difficulty in pricing assets given the challenge in building a target's financial projection in the current environment, especially those with less sticky income, he said.

However, valuations have yet to deteriorate significantly with many businesses now in the market generally deemed to be of good quality, he said. Where there may be a slight compression in valuations may come from the increasing cost of financing, he added.