Lyceum shelves fund IV, moves to deal-by-deal

Lyceum started raising the fund last year, working with Lazard as a placement agent. According to a source close to the situation, fundraising proved tougher than expected, and the team ultimately decided to move towards a deal-by-deal funding model.

Lyceum was not available for comment.

The firm is expected to continue working with a number of its current LPs and co-investors, in addition to potential new partners, under this deal-by-deal model. This new approach could ultimately see the GP explore new deals outside its established strategy, including smaller or larger transactions, targets based outside of the UK, and minority deals, according to the source.

A number of reasons contributed to the shelving of the fund, the source added. These include a number of existing LPs being unable to commit to the new fund, as well as a more cautious stance on UK funds with Brexit looming from several international investors.

LPs in fund III include Alpinvest Partners NV, Capital Dynamics, New York State Teachers' Retirement System, Kuwait Investment Authority and University of California, among others.

Lyceum has also not see any exits from its previous vehicle to date. Lyceum Capital Fund III held a final close in 2013 on £330m against a £275m target. The majority of the vehicle was deployed in the past couple of years, with investments including Bellrock, Briefing Media, Coryton, Isotrak, Sabio, Sequence Care, Style Research and Total Mobile. More recently, the GP backed UK-based fire safety company Churchesfire alongside management, in a deal valuing the business at £40m. According to the source, the fund is currently valued at 1.5x cost.

Lyceum started out in 1999 with a £100m cornerstone investment from WestLB and £100m from friends and institutions the team had worked with previously. The team then bought itself out of WestLB – a process that took three years but completed at the end of 2006 – and subsequently closed its second fund in 2008 on its £255m target.

Fund II is fully deployed over nine deals with seven investments already realised, comprising Access, Adapt, Clearswift, Compact Media, M&C Energy, Synexus and UKDN. These are understood to have generated a return of 2.6x capital invested.

The shelved fundraising plans will result in a leaner team at Lyceum, according to the source, led by co-managing partners Jeremy Hand and Simon Hitchcock. At the time of publication, the GP's website did not include details of the current team.

unquote" spoke to Andrew Aylwin and Jeremy Hand about the firm's evolution at the end of 2016 as part of our In Profile series. At the time, one recent development in the firm's investment thesis was to move away from investing in consumer-facing companies. UK sandwich group Eat, which it acquired in 2011 and is still under Lyceum ownership, was the last in the sector.

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• UK / Ireland
• Horizon Capital (formerly Lyceum Capital)