Medu Capital has raised a R850 million ($107 million; €67 million) second fund, according to Ernest January, one of the firm’s co-founding executive directors.
The South African mid-market buyout firm has been fundraising for the last two years on the strength of its R250 million first fund raised in 2003. The firm was able to raise more than triple this amount after selling Capital Outsourcing Group, a South African recruitment agency, last year, to South African trade buyer Adcorp. The exit raised R238 million through the sale of its 70 percent stake, returning the majority of the fund to investors.
January said the firm’s first fund is expected to provide returns to investors of more than its targeted 30 percent internal rate of return.
Investors in the second fund included CDC, the UK development agency, FMO, the Dutch development agency, as well as local funds of funds Bunani Private Equity and Alternative Equity Partners.
January said: “The South African mid-cap market is growing over time, but we believe it is relatively neglected by investors. This means target companies are less institutionalised and we’ll typically be negotiating with the owner himself. The process is less sophisticated and it takes longer, but we believe you can get better prices when you’re negotiating across the table.”