Qualium raises more than EUR 500m for third fund against tough fundraising backdrop

Min Ho
31 May 2023

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Paris-based Qualium Investissement has held a final close for its third-generation fund, Qualium Fund III, with capital commitments of more than EUR 500m, following two years on the marketing trail.

"Our fundraising went very well, but we are not out of the [challenging] market and we felt more tension in the market from the summer of 2022, particularly from our American investors who were worried about the war in Ukraine and the ECB's management of inflation," said Managing Partner Jean Eichenlaub.

"Like everyone else, with rising rates and less liquidity in the market, many LPs told us about their constraints. Fortunately, we have a very diversified investor base and that's why I think we've done quite well," he added.

The GP had been marketing the fund since end of summer 2021 and had raised around EUR 400m by last April, partner Guillaume Peroz previously told Unquote. It had hoped to close the fund by end of 2022, as reported.

The GP's predecessor vehicle, Qualium II, held a first close in December 2017 on EUR 370m, followed by a final close on EUR 425m in October 2018.

Investors

Qualium Fund III received "the full support from prior fund investors" and bought in more twenty new investors from France, Europe and North America, according to a press release. Its LP base is mostly made up of institutional investors, namely insurance companies, mutual funds, funds-of-funds and banks. It also has backing from family offices and private investors, including portfolio company executives, entrepreneurs, and family shareholders, it said in the statement.

LPs in its predecessor fund, Qualium II, include Caisse des dépôts et consignations, the European Investment Fund and Halisol Groupe, according to Unquote Data.

Investments

Qualium Fund III has so far invested around EUR 220m in five companies, namely IT services group Constellation; debt collector Recocash; pharmaceutical equipment manufacturer VERDOT Ips²; content management solutions provider AmeXio; and equipment leasing group REALEASE Capital, it said in the press release. The portfolio companies have made seven build-up acquisitions so far, it added.

Qualium typically buys businesses generating EUR 10m-EUR 15m EBITDA with the aim of doubling or sometimes tripling their size to attain a critical size before selling them on to mid-sized Anglo-Saxon funds.

While a sector agnostic fund, the GP has built "strong expertise and hands-on experience" in a number of sectors and markets including B2B digital services, pharma & healthcare services, education, real estate and financial services, food and agriculture, business services and software," he said.

Exits

Qualium is eyeing at two exits for the remaining year, Eichenlaub said. This follows two major exits last year, namely Lyon-based business school Emlyon to Galileo Global Education, as well as Neuilly-sur-Marne-based electric heating group Vulcanic, which was sold to UK peer Spirax Sarco Engineering for more than EUR 260m, Eichenlaub said.

While the M&A market has become tougher, Qualium operates in the mid-cap segment, meaning that it is not excessively affected by the higher interest rates environment and the wider capital markets when it comes to exit, he said.

Qualium's "first mission" is to bring its companies up to a minimum EBITDA level, which would then be sought out by pan-European funds in the upper mid and large cap segments. The firm's exits typically involves selling to larger peers such as Montagu, Permira, Platinum Equity and other upper-mid market Anglo-Saxon funds, he said.

"At EUR 20m-EUR 30m EBITDA, the field of possibilities is wider, both for industrial and financial exits. This is one of the attractions of our market segment," he said.

"The good news is that, even if fundraising is more difficult today for many funds, dry powder is still very substantial, particularly in the upper mid-market," he said.

People
Qualium Investissement – Jean Eichenlaub (managing partner).

[Editor's note: The article has been updated post publication to add comments from Qualium Investissement Managing Partner Jean Eichenlaub.]