BD Capital mulls second fundraising towards end-2023

Min Ho
06 March 2023

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Mid-cap private equity firm BD Capital is likely to begin raising its second fund as early as late 2023 as deployment for its debut fund has crossed the half-way mark, managing partner Andy Dawson told Unquote.

The fundraising plans follow last year's closing of BD-Capital I, which Dawson says was "one of the largest first-time funds raised in Europe in the last three to four years", although he declined to comment on the figure or the new vehicle's target.

The London-based sponsor's investment strategy takes a leaf from Advent International, where several of its senior executives including Dawson and co-founder Richard Baker previously worked, he said. One particular differentiator that BD Capital is keen to emphasise on from its peers is its "operator-led" investment approach and applying it to the mid-cap space as opposed to the large-cap market, he said.

This approach lies on providing guidance to portfolio companies' CEOs in areas across sourcing, diligence, execution and value creation, he said. The team, which insists on not interfering with the management of portfolio companies, is led by members which have had extensive experience running major companies in Europe, he said. This includes Baker, who has previously served as chairman of Whitbread, the British Retail Consortium and DFS, Virgin Active, among others. His previous executive roles include CEO of Alliance Boots and COO at Asda.

BD's first fund has typically written equity cheques ranging from EUR 25m to EUR 100m across the UK, Benelux and Iberia in sectors including healthcare, services and consumer, he said. Its second fund is not expected to differ from BD-Capital I, he said.

Another feature likely to appeal to LPs include strong co-investment capabilities, allowing its investors to share in a larger slice of the returns, he said.

"We could have raised a much larger fund, but the LPs would hate that, especially when you're in that fund one to three period," he said. "You want to really make the LPs absolutely love you and give them what they want in terms of number of features, of which co-investing is one of them, and that's what we're doing."

However, he acknowledges that the fundraising market is currently "really tough" as GPs deal with the denominator effect, longer timeframe to reach a close and potential poor performance for some. Emerging funds could also face even greater difficulties than large-cap GPs, which have longer performance track records to showcase, he said.