Livingbridge reaches £1.2bn mark for seventh fund

Mid-market private equity investor Livingbridge registered its seventh flagship fund, Livingbridge 7, in November 2019, according to Unquote Data. Although launching the fundraise in April 2020 was a challenge, the GP has experience in raising funds through difficult cycles, partner Fiona Dane tells Unquote: "There is always something going on in the macro environment, no matter when you fundraise. For example, we were almost about to close Livingbridge 6 when the Brexit referendum took place in June 2016 – rolling forward four years, Brexit was still rumbling on, and then we had the pandemic to deal with," she said.

Livingbridge 7's predecessor vehicle, Livingbridge 6, held a final close in November 2016 on £660m, surpassing its £600m target. The fund was 77% deployed as of June 2020, according to Unquote Data.

"So [the latest fundraise] clearly had its challenges," says Dane. "But it was about communicating with our investor base – understanding that some of them had to pause and have time to get their arms around their own portfolios, especially if they had a primary strategy and direct and co-investment programmes."

This experience paid off in a tough environment, Dane says: "We were able to look back on all the previous market dislocations and demonstrate that we had managed to deploy successfully throughout those fund cycles. Q4 2020 was incredibly busy – we did the last Livingbridge 6 investments, we had possibly the strongest quarter for exits ever for our firm, and valuations in the main held up very well given that we operate in pretty resilient sectors. This gave investors confidence, but some did need more time."

Teams work
The timing of the fundraise meant that the GP and its LPs had to adapt to doing more of their usual in-person processes virtually. "A number of the investors invested completely virtually, and we have still not met them," Dane tells Unquote. "Pre-pandemic, most investors would spend a day or half a day in our office at the final stage of due diligence, meeting our teams, and you can't entirely replicate this with a full day on Zoom or Teams as it would be exhausting.

"Instead, we split diligence up into blocks of a couple of hours, where they would meet the strategy, portfolio and deal teams over several days. We had to look at the information that was needed, being a little more efficient and slicker in giving access to the team members, albeit virtually."

Although initial meetings were able to take place virtually, Dane tells Unquote that she expects the final phase to return to in-person meetings when possible: "There is really no substitute for the final due diligence session being held in person – most people would prefer this to take place face-to-face, looking each other in the eye and getting under the skin of the business and the culture, not only focusing on the data and the metrics. We have all managed through the crisis, because we had to, but it feels like it will go back to face-to-face for final due diligence sessions when this is possible."

Kirkland & Ellis is providing legal advice for the vehicle.

Broad appeal
The fund's LP base includes new and existing investors from the UK, Europe and the US. The GP also said in a statement that the fund is the first Livingbridge vehicle welcoming LPs from the Middle East, Asia and Latin America.

"We will have about 35 investors in the fund," says Dane. "What was interesting is that just under two thirds of the fund was existing investors re-upping, by volume. But where we saw quite a lot of growth was from the US investor universe: almost half will be US-relationship monies, which is an increase on our prior fund."

The increased fund size was appealing to many larger LPs, Dane said. "Economically it is viable for the larger investors to invest once the fund target is around $1bn. We focus on backing smaller, fast-growing SMEs, and large LPs can struggle to get access to the typically smaller funds that focus here.

"Around 60% of the fund is from public pension funds, insurance companies and corporate pensions. We also have some wealth managers, family offices, and a low percentage from funds-of-funds, which has naturally been seeing a steady decrease as our funds have progressed in size."

"The minimum commitment was £10m, and the only exceptions were for a few smaller family offices who have always backed us, which we were happy to accommodate," Dane adds.

Investment strategy
The GP's latest fund will continue to focus on investments in SMEs. However, due to its larger size, it can invest equity tickets of up to £150m in businesses with enterprise values of up to £300m.

"We want to do more deals in this fund – we finished deploying Livingbridge 6 a year ahead of schedule so we expect Livingbridge 7 to do 20-22 deals over five years, whereas Livingbridge 6 made 17 deals over four years," says Dane. "From a risk perspective, we want to continue our successful diversification strategy – it's about doing more of the same."

Livingbridge 6 made equity investments of £2-40m, targeting companies with enterprise values of £20-75m. Its average equity commitment per deal was around £35-40m.

Livingbridge 7 will continue to invest in sectors including services, technology, consumer, healthcare and education. It will principally target the UK, although the fund will also invest in Australia, with deals sourced via the GP's Melbourne office.

The fund's first investment was to back the merger of Australia-based GP practices Better Medical and SmartClinics in January 2021.

"It's quite a buoyant market with lots of deal activity and there are a lot of attractive opportunities," says Dane. "A major difference in the environment since the global financial crisis of 2008 was that there was not really any readily available debt, and debt funds were not as prolific as they are today – but the market will remain busy this time as debt funds are remaining active and that enables deals to happen. We are cautiously optimistic as we emerge from national lockdowns and hopefully the worst of the pandemic, and we hope to add a couple more assets to Livingbridge 7 before too long."

People
Livingbridge – Fiona Dane (partner).

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