Dunedin team moves on as firm winds down

Dunedin is now in run-off mode as it abandoned plans to raise a follow-up fund to Dunedin Buyout Fund III, which closed on GBP 300m in 2013, according to a source close to the situation.

Dunedin Buyout Fund IV was registered in July 2018. As of October 2020, the vehicle was on the road and working towards a first close with an overall target of GBP 300m, having launched in June of that year, as reported by Unquote. The fundraise was ultimately called off in January this year, the source close said. The limited partnership of Dunedin Buyout Fund IV was dissolved in July 2021, according to a Companies House filing.

A confluence of events toward the end of 2020 made the fundraise unviable, according to the source close to the situation; this included the fact that some LPs in previous Dunedin funds were now moving away from UK funds, while others were limiting their allocation to PE more broadly. The first close was not going to be at the size desired so the firm made a call to shelve the fundraise and enter a wind-down process, the source added. This was not down to Dunedin III's performance, they said, as capital had already been returned to investors and its distributions to paid in (DPI) ratio is currently well above 1, with several assets still remaining.

The firm's first fund was also successful, while performance for the second fund, which was raised just prior to the global financial crisis, was not as good, the source added.

Founded in 1983 and operating as an independent business since 1996, Dunedin is not the only UK sponsor to have recently experienced difficulties in raising a new fund despite a seemingly buoyant market: Silverfleet Capital no longer intends to raise capital for its third flagship fund, turning its focus to follow-on investments and realisations in its existing portfolio, Unquote reported in July. The GP had registered Silverfleet Capital Partners III in July 2019.

Where are they now
Dunedin saw a number of departures following the decision to wind down, including partners Nicol Fraser, Simon Rowan and Oliver Bevan. In early October, Fraser joined BGF to lead its investment team in London and the south-east. Fraser led the investment team at Dunedin and was at the firm for 20 years, having joined in 2001.

In September, fellow partner Rowan moved to Grafton Capital. He had spent 13 years at Dunedin, having joined in 2008. Prior to that, in June, Bevan joined Waterland to head its UK activities as the firm opened its first London office. Bevan had worked on deal sourcing and execution in the UK for Dunedin since 2007.

Partners were given the choice to stay on with the business or leave after the decision to wind the firm down was taken, according to the source close. "There was no angst involved, everyone remains in the carry," they added.

More junior investment team members have also left Dunedin, including investment directors Andrew Davidson, Jessica Hardy and Katie Chung. Davidson joined Scottish Equity Partners in July, following eight years at Dunedin. Hardy joined MML Capital in May, after six years at Dunedin. Chung moved to CGE Partners in March; she had also been at Dunedin for six years.

In late 2019, Dunedin hired Claire Blackhall and James Morrison into its new, dedicated Research and Direct Origination team. Both left earlier in 2021, with Blackhall joining Aberdeen Standard Investment as a senior investment analyst in April, and Morrison becoming an analyst at Time Partners that same month.

As of 26 October, the staff page on Dunedin's website only listed managing partner Shaun Middleton, senior partner Ross Marshall, and partners Dougal Bennett and Mark Ligertwood, alongside finance director Graeme Murray and financial accountant Hayley Bowman.

Recent exits and remaining portfolio
Dunedin III was 100% deployed as of February 2020, according to an LP-supplied update on Unquote Data. In its last platform deal, Dunedin acquired insurance broker and administrator Acquis in a management buyout in May 2019.

While it is now in run-off, Dunedin is not expected to "accelerate or decelerate the divestment pace", the source close said, adding that it would "run its normal course".

The firm has made three exits since the start of 2020, according to Unquote Data. These include specialist insurance provider Kingsbridge Risk Solutions, sold to NSM Insurance in a deal valuing the business at around GBP 120m. In February this year, Dunedin sold components manufacturer Formaplex to Elaghmore Partners, having been invested in the business since 2008. Most recently, the firm sold its stake in automotive care products provider U-POL when the business was bought by US-based Axalta Coating Systems.

In addition, Dunedin is set to partially realise its investment in Global Processing Services following a USD 300m investment from Advent International and Viking Global Investors announced earlier in October, though it is still pending approval.

Earlier Dunedin III exits include the sale of a minority stake in construction consultancy Blackrock Programme Management to ICG in 2017. The deal gave the business a GBP 161.5m enterprise value and allowed Dunedin to reap a 2.8x money multiple after two years and four months of investment, representing a 60% IRR, according to Unquote Data.

Dunedin also netted a 2.8x return when it sold courier firm Citysprint, another Dunedin III investment, to LDC in 2016. It reinvested growth capital at the time, although its website now shows the investment as exited.

One of Dunedin III's standout deals was consultancy service Alpha, which the GP listed in October 2017 with a GBP 163m market cap. Dunedin generated a "strong" return for investors after just 19 months, with an IRR of 55%, it said at the time.

Older assets in Dunedin Buyout Fund III include EV, which specialises in visualisation technology for the oil and gas industry, backed in 2014. The fund also owns a stake in international consultancy FRA, having invested in 2017.

Remaining assets in the portfolio include some investments originally done through the 2006-vintage Dunedin Buyout Fund II vehicle, including financial services business Hawksford; the GP originally backed the company in 2008, although it partially realised its investment last year and now retains a minority stake, according to its website. Dunedin also still owns a stake in crawler crane hire business Weldex (originally backed in 2010); steel and nickel alloys producer Premier Hytemp (2012); and consultancy Red (2011).

Current Dunedin portfolio

Source: Unquote Data, Dunedin website

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