YFM Equity Partners (YFM) has held the first close of its Buy-Out-Fund II with GBP60 million of investment committed. This follows the GBP45 million raised for its Buy-Out Fund I, which had a final close in April 2017.
Only two years later, and following the recent investment in The Protein Works, this fund is now almost two thirds invested.
“Nearly three quarters of the funds have been raised for our Buy-Out-Fund II from existing investors, which is a great endorsement from our investor base, with over GBP15m from new investors,” says Mike White YFM’s Partner responsible for Investor Relations.
YFM’s strategy is to raise funds that are invested over two-three years. This gives investors shorter commitment periods allowing them to re-invest with YFM over shorter cycles. “This is something we learnt investors found attractive when raising the first fund,” adds White.
Buy-Out-Fund II will continue the investment strategy established by the first fund where typically YFM invests between GBP3 million-GBP7 million through its UK footprint of offices into businesses where there is a change of ownership and strong growth potential. The strategy for Buy-Out-Fund II will be to hold second and final closes before the end of 2019 and the fund will invest over a similar period to Buy-Out I, investing into 2022.
White adds: “What we have found most interesting is the funds have all been raised from within the UK with all our new investors being individuals, family offices or high net worth investors. Most of these investors have generated their wealth as owner managers in the UK small business sector which has given them enormous empathy and a strong understanding of what we do and the businesses we invest in.”
David Hall, Managing Partner, says: “We believe the market for these smaller businesses is less well served which has been demonstrated by the success of our Buy-Out Fund I which is nearly fully deployed just two years after its final close. In addition, we realised one of our investments at the end of 2018, delivering a 4.2x return which shows there is real and tangible value in this market.
“There’s been a strong investor appetite in both our Buy-Out-Funds which has seen YFM raise over GBP100m in addition to the GBP35 million invested in our growth funds. This provides us with powerful investment capacity to support and invest in the UK’s small businesses with funds under management now exceeding GBP300 million.
“We are targeting a fund size of GBP75 million so as to have a manageable portfolio and it is very encouraging to have such a strong first close.”
