3i breaks mid-market record

3i has raised €5bn for its latest buyout fund, the largest ever raised for the European mid-market coming in €1.5bn over target.

The fund, called Eurofund V, has raised commitments from 62 LPs across the globe, including €3bn, or 55%, from its own balance sheet. The firm managed to attract a large number of new investors, the bulk of which are from North American and the Middle East.

3i will use the money raised to make around 50 acquisitions over the next fours years, its main focus being Europe but with some capacity to invest elsewhere, with a particular eye on increasing the firm’s presence in Asia.

Just like its predecessors, the fund will invest in companies with an enterprise value of up to €1bn operating across a diverse range of sectors. Of special interest are those companies operating in the media, in healthcare, and business and consumer services.

Eurofund V’s predecessor fund closed in July 2004 on €3bn and has made a number exits of late, including own-label Dutch fruit juice business Refresco, which generated a 3x multiple in two years. Other recent exits for 3i include the Swedish clothing retailer Gant, which floated in a €241m flotation of, achieving a 91% IRR and money multiple of 4.7x; betapharm, a German pharmaceutical company, which was sold to India’s Dr Reddy’s Laboratories in a €480m deal; and Swiss aerospace business, SR Technics, which it sold for €1bn to a consortium of investors based in the United Arab Emirates.

The fund closing comes just a few weeks after the London-based firm reported its first-half net asset value (NAV), which were at the upper end of expectations, and would have been even higher had it not made losses from its venture business.

As the largest mid-market fund to be raised this year Eurofund V was put together in an environment of frenetic fundraisings by medium-sized firms. In October AtriA Capital Partenaires, a French middle market LBO player, closed its third LBO fund with €300m in commitments, ARGUS Capital Partners raised €213m at its second closing for ARGUS Capital Partners II, Palamon Capital Partners raised €670m for Palamon European Equity II, and Waterland Private Equity Investments managed €400m, as well as November’s closing by Inflexion of a €244m buyout fund (see page XX for more on this).

UBS acted as placement agent.