YFM closes Buyout Fund II on £80m

Katharine Hidalgo
07 April 2020

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YFM Equity Partners has closed its Buyout Fund II on ТЃ80m.

The fund held a first close in March 2019 with a target of £60-75m and had no formal hard-cap. It held a final close on March 31st 2020.

Mike White, the partner at YFM responsible for fundraising and investor relations, said: "The coronavirus situation only affected the fundraise towards the end of it, as we had already won most of our commitments. Over 90% of investors committed, with only a small number, who had to reorganise assets, dropping out."

The fund's predecessor closed on £45m in May 2017 and has made 10 investments and one realisation. White said: "Fund I is now fully invested and is progressing well. The first exit from the fund also generated healthy returns, which was helpful in the fundraise." YFM Buyout Fund I sold Indigo Telecom Group to Growth Capital Partners in December 2018 for a return of 4.2x money.

Domiciled in the UK, YFM Buyout Fund II is structured as a UK LP and has an eight-year fund life with two one-year extensions. It has a 2% management fee, 8% hurdle and 20% carry rate. White said: "We only charge a management fee on drawn, rather than committed capital."

Addleshaw Goddard provided legal advice and the fund did not use a placement agent.

Investors
The investor base of the fund is made up of around 45-50 UK-based investors, including cornerstone investments from Kent County Council Superannuation Fund and Nottinghamshire County Council Pension Fund, according to Unquote Data. The remainder are entrepreneurs and high-net-worth individuals. Some members of YFM-backed management teams have also invested.

"We know many competitors focus on institutional funds for investment, but we're really pleased we took a different route, and included high network investors and entrepreneurs too" White said. "Our proposition really resonates with these types of investors, because they instantly empathise with what we do."

A majority of Buyout Fund I investors also participated in this fundraise. LPs in the predecessor fund included, Kent County Council Superannuation Fund and Nottinghamshire County Council Pension Fund.

The investors typically committed £500,000-5m.

Investments
The fund will invest £3-10m per transaction into businesses with strong growth potential located across the UK. Its investment period is around three to four years.

The fund has not yet made an investment and has one deal on hold. White said: "The investment team is pretty active right now. We have several things in various stages of the pipeline and we hope to invest later this year."

He continued: "I think our investors understand there is going to be a hiatus in the market, and they appreciate that the businesses we invest in need to be in the right shape to warrant that investment. We also expect prices to drop somewhat in the current environment."

People
YFM Equity Partners – Mike White (partner).