Indigo Capital, the UK mezzanine investor specialising in backing mid-market buyouts across Western Europe, has evidenced the continuing appetite for mezzanine product amongst investors by closing its fourth fund almost 20 per cent above its original target of E400m.
The fund proved a success with investors from its launch and held a first close at E242m in late October. According to Indigo director Kevin Murphy, investor demand was such that the firm could have easily exceeded the final close total. “We informed potential investors of our intention to cap the fund at E475m which meant that investors were quick to come on board for the final close.”
Capital commitments to Indigo Capital IV have been made by pension funds (59 per cent), insurance companies (23 per cent), government agencies (14 per cent) and other institutions (four per cent). 45 per cent of the fund was subscribed by investors from the
The fund has received commitments from a total of 28 investors, including fund-of-funds group Adams Street Partners, insurance giant Cigna, Russell Alternative Investment Group, Scottish Widows Investment Partnership, HarbourVest, Hermes Pension Management, Finnish investment group Pohjola, West Midlands Pension Fund and Pantheon Ventures.
Mezzanine has remained popular with investors despite a broader downturn in investors' commitments to private equity: recent reports have suggested that commitments to the asset class dropped by 30 per cent drop in 2002. “The fact that mezzanine is a lower-risk investment is beneficial in a cautious market,” said Murphy. “But investors are more interested in track record and consistency.” Indigo’s four directors Richard Collins, Christopher Howe, Kevin Murphy and Martin Stringfellow, have been investing together as a team since 1990/1.
Indigo Capital will continue the strategy executed by its first three funds. Investments of between E10m and E50m will be made by the fund. Larger investments up to E100m will be underwritten and sold down. The emphasis will be on growth-oriented, middle-market European private companies with strong market positions and incentivised management teams. Previous funds have been invested across
Indigo’s most recent participation was in PPM Ventures’ E170m acquisition of French-based industrial maintenance company Prezioso in December. “The Prezioso investment came from our third fund. The fourth fund’s investment period began at the beginning of 2003, although we do not anticipate any transactions in the near future,” added Murphy.
Credit Suisse First Boston acted as placement agent for the fund, the first time it has worked with Indigo on a fundraising.