ECI Partners, the UK mid-market investor, has closed its 11th fund on a £700m (€791.9m) hard cap within 80 days of official launch.
The close makes ECI the first UK firm to raise eleven successive funds focused on the same strategy. The fundraise commenced in the middle of April with a target of £650m and was materially oversubscribed with a re-up rate of around 80 per cent from existing investors.
“We maintain extensive dialogue with investors and there is a near constant flow of information. When the time comes to fundraise long-standing relationships with people who know us deeply makes a big difference, especially when a large portion of the new fund comes from investors who re-up,” ECI managing partner David
Ewing said the firm also worked hard to ensure that the process was slick and seamless for LPs. ECI prepared wide-ranging due diligence on itself before launch, building a data room that included extensive referencing from portfolio company chief executives, chairs and advisers.
The fund has received commitments from 25 institutional investors, including pension funds, insurance companies, fund of funds, endowments and family offices from across the UK, US, Europe and Asia.
In addition to the usual questions from LPs, Brexit was an area of focus for investors in the due diligence process.
“Brexit obviously wasn’t an issue the last time we went on the road, but LPs did spend time discussing concerns around the macro-economic picture and what it means for portfolio companies,” Ewing said. “There was a huge amount of concern around Brexit at the time of the referendum but over time LPs have become more comfortable with it. The UK is an entrepreneurial society with fast-growing businesses. There are more than 2,500 companies in the UK growing earnings at more than 10 per cent a year, and a third of European deals are in the UK so it will continue to be a core component for investors. If you invest in private equity you can’t ignore the UK.”
ECI 11 is 40 per cent larger than its predecessor ECI 10, which closed on £500m and has been investing since October 2014. The firm will continue to invest in UK growth buyouts of companies with an enterprise value of between £20m and £150m. The firm has a team of 28 investment professionals with dedicated expertise across the disciplines of origination, commercial and investment.
ECI traces its routes back to 1976, when it was founded as Equity Capital for Industry and has raised £2.4bn of outside capital since launch. From 1990 onwards ECI has secured more than 100 exits with a gross return of 2.5x money and an IRR of 36 per cent, generating a realised uplift of £2bn in value for investors
The fund received strong support from global institutions, including an Asian LP for the first time, even though it was raising less than £1bn, which is usually the starting threshold for international investors given their minimum cheque sizes.
“Minimum cheque sizes and concentration issues are something we are aware of, but we know our audience. If your performance is strong and you have a stable team then you will gain traction,” Ewing said. “Our performance has been very good over a long period of time and we have managed succession during that period so there is demonstrable sustainability of the investment strategy and of ECI as a management company.”
The ECI managing partner added that the firm could have raised a larger fund but refrained as it wanted to keep focusing on mid-market deals.
“We had to exercise restraint and scale back investors. We want to keep the discipline of doing mid-market deals and we value the relevance of our track record. Investors noted that and that makes the offer very attractive,” Ewing said.
ECI has also decided against raising “baby funds” alongside its flagship vehicle, a strategy that has been popular among other successful mid-market investors who have seen the opportunity to launch new strategies and swell assets under management.
“We wanted to stay very focused on what we do well. There is no B team at ECI,” Ewing said.
The firm was advised by legal counsel Macfarlanes, but did not use a placement agent.