Polaris V holds final close on EUR 650m hard-cap

The final close took place on 31 January 2022, according to a statement.

Houlihan Lokey acted as placement agent, while Gorrissen Federspiel and Goodwin Procter provided legal advice.

The fund has EUR 690m to deploy including its GP commitment, according to a statement.

The vehicle was registered in June 2019 and held an interim close in September 2021 on its target of EUR 550m, according to Unquote Data. Prior to this, it held a first close in April 2020 on EUR 323m.

Asked about the timing of the fundraise, managing partner Jan Johan Kühl told Unquote: "We went into the market in summer 2019, and were ready for a first close – but when Covid broke out, a lot of LPs put everything on hold, and we were caught in that."

The GP then had to assess how to proceed amid the uncertainty brought about by the pandemic, he added. "We were concerned that we would be entering a period where fundraising would take some time, and we wanted to be ready for the strong dealflow that we were seeing pre- and during the pandemic. So we went forward with a first close in April 2020, which was a dry close, to make sure we could deploy Fund IV, since we still had room for two deals.

"We had a delicate balance to reach with our LPs – some were existing LPs who had signed up already and wanted to commit more, but we also had some new LPs and we wanted to give them the allocation they wanted," Kühl said. "We could have called it a day in September, but we had new LPs who were taking the time to get to know us and we did not want to disappoint them; and given that we have doubled our team size over the past seven years and we knew that we could deploy faster, and already had made five platform investments in the new fund, it made sense to go after the hard-cap."

Polaris IV held a final close in October 2016 on EUR 450m. The fund made 12 deals, two of which were completed in 2020.

The fund is an Article 8 fund within the EU's Sustainable Finance Disclosure Regulation. Polaris made the internal appointment of Martin Bang-Löwgren as head of sustainability as part of its ESG policy and targets climate action, gender equality, and decent work and economic growth in its ESG measurement.

"At the lower end of the mid-market where we operate, we see ESG transition as a massive opportunity for value creation – it is the most powerful value creation lever in our average five-year holding period," Kühl said. "We are not an impact fund, but we do make an impact value-creation-wise by doing this. [As head of sustainability] Martin is embedded in our process and not just making communications to LPs or the press, we want to make sure that we are not greenwashing and make a real impact."

The GP works with Footprint Firm and Global CSR for its ESG reporting.

Investors
The fund's LP base includes pension funds, sovereign wealth funds and wealth managers, according to a statement.

LPs in Polaris IV included funds-of-funds such as Unigestion, as well as Nordic public and private pension funds.

"There is nothing fundamentally different about the LP base for Fund V, although we have a very strong re-up rate from all our non-Danish LPs," Kühl said. "We have also seen a bit more family office appetite, since our strategy fits well for them and there has been a massive professionalisation of that segment, where a lot were underinvested in PE."

The LP base is made up of European LPs, but Polaris expects US LPs to potentially join for its next fund, Kühl said.

Investments
Polaris acquires directly sourced Danish and Swedish mid-market companies, focusing on consumer, industrials, services, healthcare, technology and financial services. The fund was opened for investments at the start of January 2021. It is 27% deployed across five portfolio companies, all of which were acquired in 2021.

Polaris V expects to write equity tickets of EUR 15m-65m, with an average of three or four deals per year and around 15 deals in total. Polaris works with a network of around 60 industrial advisers and around half of its deals to date have been via inbound approaches from companies or management, Kühl said.

"The fundamental part of the portfolio will be the same, with a slight uplift in our average tickets, but no drift," Kühl told Unquote. "Historically, we have done deals that were slightly on the higher side of our core range, but the fundamentals of the business such as size and maturity were in the scope of what we do. You might see a few more of those in the portfolio, such as the Danica Pension Sverige carve-out from Danske Bank and Molslinjen."

Polaris continues to see a strong deal pipeline, according to Kühl. "We had never seen so many deals as we did last year – we had 242 deals in our pipeline, so we bought 2% with our five deals. This year the level is still the same: we have two deals in exclusivity, but we will still be careful about discipline at entry, especially in a market where we have seen multiples getting very high."

In addition to new platform deals, Polaris is also pursuing bolt-ons for its Polaris V companies, including insurance business The North Group and G&O Maritime Group, Kühl said.

People
Polaris Private Equity – Jan Johan Kühl (managing partner); Amanda Platek (head of investor relations).

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