Polaris Equity defies market to raise new fund

Polaris Equity has held a first close of its third small- to mid-market buyout fund on EUR275m, defying market pessimism. It has, however, been a slow process. The fund launched in October 2008, only weeks after the collapse of Lehman Brothers - "the worst possible time," as managing partner Jan Johan Kuhl describes it. Yet, the fund attracted commitments from both existing and new investors. Notably, this is the first Polaris fund which has received backing from international investors.

Kuhl expects Polaris will reach their target of EUR350m by summer this year. The fund manager is already in due diligence with new investors regarding fund subscriptions. "The feedback we have received from investors shows they are increasingly attracted to opportunities in the lower mid-market," Kuhl says, adding: "In the fundraising process, LPs also emphasised the importance of proven investment teams that have experienced recession before, and business models that prioritise operational improvement over financial engineering."

Polaris' target investment case is a company with an enterprise value of EUR40-100m, that is "slightly underperforming" and which will benefit from a buy-and-build strategy.

The first investment from the fund has already been made with the acquisition of two cleaning companies: Kolving & Thaning and Alliance clean & care, from the founders. The two companies will be merged under the name Alliance+.

Kuhl says the fund has several deals in the pipeline. "This is a good time to invest, not only because of lower valuations, but also as we can recruit good management teams that are hungry for success," he explains, adding: "Our portfolio companies are in a growth phase, so managers can experience an upside, rather than the downsizing so many larger companies are experiencing now."

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