Palatine holds £220m final close for fourth fund

Harriet Matthews
21 June 2021

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UK mid-market GP Palatine Private Equity held a final close for its fourth fund on ТЃ220m in May 2021, managing partner Gary Tipper has told Unquote.

Palatine Private Equity Fund IV had a £250m target and held a first close in Q3 2019 on £150m, Tipper said.

Although the final close was delayed due to coronavirus, the fund's total commitments remain in line with Palatine's strategy, Tipper said: "We have raised new capital of £220m, which is in line with Fund III. Covid and Brexit had an impact on UK-specific funds, as well as on European continental investors."

Palatine took the decision to complete the fundraise to take advantage of its growing deal pipeline, Tipper said: "We felt that we could have got the fund closed at the target if we had kept it open for longer, but we have enough capital to continue with our investment strategy and are busy with deals, so we decided to close now."

Evercore acted as placement agent, while Fried Frank Harris Shriver & Jacobsen provided legal advice.

Palatine Private Equity Fund III held a final close in June 2015 on £220m. The fund made 10 platform investments, the most recent of which was IT support and cloud service provider Acora in March 2020.

In addition to its buyout strategy, the GP also manages an impact-focused strategy. Its first Palatine Private Equity Impact Investing Fund held a final close in September 2017 on £100m. The fund invests £5-10m in businesses in the fields of integrated health, ethical consumerism, lifestyle and wellbeing, and the circular economy, with the aim of delivering positive social impact.

Palatine has a team of almost 40 people, with offices in Manchester, London and Birmingham.

Investors
Palatine IV has around 30-40 private individuals backing the fund (including entrepreneurs with whom Palatine has previously cooperated), plus around 15-20 institutional investors, Tipper told Unquote. Tickets from institutional investors are all in the £2.5-40m region.

"We mainly have UK and European LPs, with around 60% of the fund's capital from existing investors," Tipper said. "We had a good re-up rate and it was also good to bring in some new investors with a UK or Europe focus, as well as some US investors. Our new investors are mainly pension funds."

According to Unquote Data, LPs in the fund include several UK-based corporate and public pension funds, as well as European insurance companies and asset managers.

Investments
Palatine IV expects to make 10-12 platform investments and has made four so far. The GP expects the fund to be 30-50% invested by the end of 2021, Tipper said, with one to two more deals to come this year.

Palatine's buyout strategy has typically deployed equity tickets of £10-30m, targeting UK-based businesses. The GP generally focuses on B2B investments, although the firm targets a range of sectors including financial services, TMT, healthcare and leisure.

"The strategy for Fund IV is largely the same," said Tipper. "We are very focused on three areas: buy-and-build; identifying value creation opportunities with our own value enhancement team; and ESG, which is integral for us and means that we can help companies improve their impact on the environment and society."

The fund made its first platform investment in October 2020, acquiring NRG Fleet Services. The fund acquired a significant minority stake in sustainability consultancy Anthesis in March 2021, followed by the buyout of YFM-backed cloud and contact centre communications business FourNet in June. Most recently, the GP acquired a majority stake in Key Capital Partners-backed Routes Healthcare.

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Palatine Private Equity – Gary Tipper (managing partner).