Mezzanine investor Indigo Capital has closed its fourth fund at €475 million, well above the original target of €400 million and nearly double the size of its last fund. The firm said investor demand exceeded the €475 million cap during the speedy fund raising. The fund was launched in April last year and held a first closing at the end of October having raised €242 million.
Indigo director Kevin Murphy attributes Indigo’s fund raising success to the firm’s past performance: “It’s very much a matter of track record. Investors like teams that have been together for a period of time and raised a series of successful funds.” Investors are also erring on the side of caution, which puts mezzanine, at the less risky end of the private equity spectrum, in a good position.
Murphy said that capping the fund after the first close meant potential investors had to make commitments quickly to get in, enabling the firm to wind-up the process before Christmas. Capital came from 27 investors, both new and existing, such as Pantheon and Adams Street Partners. First time Indigo investors include Frank Russell Company, HarbourVest Partners, Scottish Widows Investment Partnership, Cigna, Hermes and Pohjola. Indigo Capital now has around €750 million under management, with the first and second funds (around €350 million) almost fully realised.
Of the total committed to Indigo Capital IV, 59 per cent has come from pension funds, 23 per cent from insurance companies and 14 per cent from governmental agencies, including the West Midlands Pension Fund. Richard Collins, director of Indigo, said: “We are very pleased with the spread and quality of Indigo Capital IV’s investors.” European and US investors both contributed about 45 per cent of the fund’s capital, with 10 per cent coming from the Middle East and Asia.
Indigo Capital IV’s investment strategy will not stray from the focus established by the firm’s four directors, previously responsible for Dresdner Kleinwort Benson’s European mezzanine activities, over the past 12 years. It will concentrate on growth-orientated, middle-market European companies with strong market positions and incentivised management teams. Minimum investments will be €10 million, ranging up to €50 million held by the fund. Investments of up to €100 million will be underwritten and sold down.
The firm has built up its team in anticipation of this larger fund size. In 1999, when Indigo raised its last fund of €250 million, it had six investment professionals. It now has a team of ten and plans to invest the new fund in a similar timeframe.
Credit Suisse First Boston acted as Indigo’s financial adviser and placement agent.