August Equity Partners V closes on £300m, acquires Air IT

The fund was registered in July 2019 with a target of £275m, though managing partner Philip Rattle told Unquote the firm officially began fundraising at the end of September at its AGM.

The fund held a first close in December 2019 on almost £200m and its final close was held on its hard-cap of £300m. "A number of investors preferred a 2020 allocation, so we kept the fund open until then," said Rattle.

"People focused on three things when they thought about what was attractive about the fundraise," said Rattle. "The strategy and business plan we have is quite distinctive, our performance has been very good over the past few years, and we've developed the investment team well. We recruit at the junior level and develop our talent internally." The firm made two junior hires in the investment team in 2019.

Rattle said: "The timing of the fundraising was interesting because it was during a period of great political uncertainty. Many of the investors who came into the fund take a long-term view for Britain and think of Brexit as a short-term obstacle."

August Equity Partners IV closed on £224m in April 2017 and recently made its 10th acquisition, its last investment. August Equity Partners III is currently in its realisation phase, exiting its sixth asset in November 2019. The fund closed on £200m in December 2013.

The fund was structured as a UK LP with a typical 10+1+1 lifespan.

Macfarlanes provided legal advice and no placement agent was used.

Investors
Many existing investors, including BMO Global Asset Management, Argentum, M&G and BNP Paribas Private Equity, re-upped for this fund, but the vehicle also diversified the firm's investor base.

Rattle said the fund saw around 25 LPs participate, a slight increase on the number for AEP IV.

US-based investors committed $170.5m to the fundraise, more than 40% of the capital in the fund, according to an SEC filing. Rattle said: "We've always had a lot of US investors, but the increase in interest is a reflection of our strong performance."

The fund has a larger share of family offices invested than in previous funds, as well as long-term endowments and pension funds and fewer funds-of-funds. Rattle said: "We took the opportunity of AEP V to look at the configuration of our LP base. We have both North American and European family offices invested, and they come from entrepreneurial activity themselves, so they have a lot of empathy with the type of entrepreneurial investments we do."

Investors in AEP V's predecessors include CNP Assurances, Partners Group, Northleaf Capital Partners, the Greater Manchester Pension Fund and Unigestion.

Investments
Rattle said the investment strategy for AEP V will be the same as that of its predecessors. It will look to make 10 investments in service-led businesses. The fund will invest £15-40m in equity in companies with EBITDA of £1-5m. The expected holding period is three to four years.

The fund has made its first investment in Air IT, a provider of managed IT support, digital transformation services and cybersecurity to SMEs. August is also actively looking at opportunities in IT services, education and healthcare services. Rattle said the firm is likely to make its next investments in the second quarter of 2020 or early in the third quarter.

People
August Equity – Philip Rattle (managing partner).

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