Doughty Hanson, one of Europe’s pioneer private equity firms, has closed its latest fund, Doughty Hanson V, reaching its hard cap target with total commitments of €3 billion in just six months.
Its success is a far cry from the plans to list a €1 billion public fund on Euronext, which the firm abandoned last October, citing concerns over similar vehicles trading at a discount to the issue price.
For the latest fund Doughty Hanson’s employees, headed by founders Nigel Doughty and Richard Hanson, have committed €150 million, in addition to the €3 billion of commitments from limited partners.
All but one of the investors in the previous fund increased their commitment to the new vehicle. One investor said: “It was an easy decision to take to committee. Fund IV is already showing an IRR of 139 percent. Saft has returned four times its investment. In total they have returned $5 billion in the last two and a half years since RHM.”
He said the appetite among investors meant Doughty Hanson could comfortably have raised €4 billion, but it would have meant breaching the fund’s hard cap of €3 billion and shifting the fund’s strategy.
Stephen Marquardt, a managing director at the firm, said: “We stuck to our word and did not go over the hard cap of €3 billion. Investors liked the team’s discipline and its focus on the mid-market as so many funds have moved on to bigger deals. We did use the opportunity to expand, selectively, the investor base.”
The investment strategy for fund V is consistent with previous Doughty Hanson investment funds – acquiring and growing market-leading, middle-market to large-sized European businesses with an enterprise value in the range €250 million to €1 billion.
Investors in the new fund include Allianz Private Equity, HarbourVest Partners, Ilmarinen Insurance, JP Morgan Asset Management, Morley Fund Management, Partners Group, Pantheon Ventures, and the State of Michigan public employee pension fund.