Terra Firma, the UK buyout firm, is understood to have started pre-marketing on its next fund, which is expected to have a €4bn target, a source close to the company said.
Terra Firma declined to comment, but its last fund closed at €3bn in March 2004, slightly under reported expectations. That is understood to be only one deal away from being three-quarters committed, the source also said. Usually, once the 75% committed capital level is reached, firms can begin formally marketing their next fund.
Terra Firma’s 10 partners, led by Guy Hands, invested more than €100m in Terra Firma II and could be expected to invest a similar amount in the new fund. Hands is the former head of Nomura’s principal finance unit, and led the management buyout to independence in 2001.
Terra Firma has won a number of competitive auctions recently, but is understood to be seeing more competition for the type of complex transactions it prefers. Through portfolio company Deutsche Annington, Terra Firma in May beat a consortium of Fortress, Goldman’s real estate investment arm and Cerberus to acquire Viterra, a portfolio of German social housing stock, from utility E.ON for €7bn.
Terra Firma is also waiting to complete its near €700m deal for East Surrey Holdings, a UK-listed water and gas distribution company, which is still under regulatory scrutiny.
Terra Firma’s putative fundraising comes in a busy year for major buyout groups. US giant Blackstone is trying to raise a US$11bn fund, while Goldman Sachs closed its fifth fund at US$8.5bn. BC Partners closed its eighth fund at €5.8bn. It is Europe’s largest fund to date ahead of an expected larger close from CVC Capital Partners.