GP Profile: Tenzing Private Equity

Technology-focused GP Tenzing Private Equity closed its second-generation fund on its hard-cap of £400m after nine weeks of fundraising in what was an entirely virtual process, according to managing partner Guy Gillon.

In total, the fund has around 30-35 LPs, 15 of which came from a pool of 18 existing investors. “The three existing investors that didn’t come into the fund had their own internal considerations and were supportive, but not within the time frame we were looking at,” Gillon says.

LPs in the fund’s predecessor include Schroder Adveq, Ohio State University, University of California Berkley Foundation and Bregal, which contributed the largest tickets of up to £30m. Other LPs include Lombard Odier, SCS Financial Services and University of Oxford Endowment.

Almost 50% of the LPs in the new fund are from the US, while the rest are evenly split between the UK and Europe, save one investor from Asia.

“We were initially expecting to go to market in Q2 or Q3, as we expected to make one or two more deals from Fund I,” Gillon says. “As the coronavirus crisis hit, we wanted to look at the existing portfolio companies and we decided we may only have dry powder for one more deal so the right time to go to market was earlier than we initially thought.”

The fund’s predecessor, Tenzing Private Equity I, closed on £200m in January 2017 and was 75% deployed at the time of the AGM in February 2020.

However, Tenzing’s primary focus when the coronavirus crisis intensified in March 2020 was the health of the existing portfolio, says Gillon: “We invest in mission-critical B2B technology companies with recurring revenues and a high ROI per customer. But no company is used to the economy stopping overnight. We had to check in on the health of the businesses.”

Portfolio and upcoming activity
Tenzing Private Equity Fund I portfolio companies include Leeds-based Smoothwall, which offers web filtering technology for the education and public sectors. The fund’s most recent acquisition was Activpayroll in January 2020, a payroll outsourcing specialist providing customers with international payroll, payment services and HR support.

Gillon continues: “We’ve found them to be well-positioned, with a good cash balance and solid liquidity.”

The firm has only realised one asset to date: FMP Global. The £29.4m investment in the treasury software developer, which was backed by Access Capital Partners, preceded the launch of Tenzing’s first fund. It was sold to Hg-backed Iris Software Group and the firm generated a money multiple of 5.4x and an IRR of 72% on the sale.

Gillon says: “We were initially contemplating some exits this summer and have had a lot of inbound interest, especially from PE-backed trade. However, in the current environment, I expect it will take six months to a year for those companies to rebound enough for that interest to become real again. We’re not in a rush to sell and are happy to be patient capital.”

Regarding upcoming investments, the firm expects to make one more investment with Tenzing Private Equity I. “Dealflow is quite good right now,” says Gillon. “We have two or three businesses we’re looking at, but we don’t expect anything to close in the next few weeks. We plan to be active in Q3.”

The equity tickets from Tenzing’s latest fund will be around £20-25m. “Part of why the fund is larger is because we plan to provide more follow-on capital to the companies, so we’re expecting to make a total investment of £30m per portfolio company,” says Gillon.

Since the pandemic has intensified, the firm has also been focused on its own organisation, making several hires and creating new teams. In March 2020, the firm hired Glenn Elliott, who previously founded human resources technology business Reward Gateway and led it through two periods of private equity ownership.

Soon after he was hired, Elliott told Unquote he had started recruitment for a four-person portfolio growth team to help portfolio company CEOs and management teams grow their businesses. He will also continue to lead Tenzing's Entrepreneurs Panel, which he has been doing since its inception in 2017.

Other hires include Charlie Taylor, who has recently joined the firm as marketing director. John Messer and Milan Kellner have also been promoted to the position of investment lead.

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