The European fundraising market is looking strong and aggressive. Its latest beneficiary has been Star Capital Partners. The private equity group announced this week it has raised €800 million in the upbeat market. But as fundraising has heated up, suitable assets are becoming harder to come by – turning fund’s attention away from the region.
Star Capital breaks the news
The European private equity group announced in its statement its hard cap has attracted strong support globally and the fund is now closed. According to the statement, investors across Europe, North America and Asia raised €800 million, with the fund looking to invest in European targets.
The statement said the STAR III fund would invest in “European strategic assets that provide an essential service to customers or users, and consistently generate stable, long term results”. Furthermore, Paul Gough and Uniti Bhalla, managing partners at Star Capital, said the group is “confident that our focus on strategic assets will continue to provide…excellent risk-adjusted returns”.
Star Capital was established in 1999 and it has invested around €1 billion across 18 businesses during its operations. It has always been a strategic investor, investing mainly in Western European targets. The recently closed fund has already completed two investments. Star Capital invested in Synergy LMS, a linen management services business operating in the healthcare sector, and Globalways, an IT services and infrastructure business operating in Germany.
Investors want funds to start deploying capital
But the buoyant fundraising market has meant European private equity groups sit on top of a lot of dry powder. For investors, the key is to ensure the capital now gets deployed and ready to make returns.
Preqin’s research has noted the fundraising mood. According to its data, funds closed in the first five months of 2017 stayed in the market for just a year. Even in this short space of time, these funds managed to raise an average of $625 million. Compared to private equity funds closed in 2013, the average fundraising period stood at 20 months – almost double the time. Furthermore, the average size of these funds was just $372 million. The fundraising is there but what about putting the money to work?
Trying hard to find suitable assets
Earlier this week, DealMarket reported on research that shows how European private equity firms are turning their attention away from European assets – the large amount of dry powder means the groups have to broaden their horizon.
Europe isn’t currently offering enough suitable assets, especially as firms worry about the uncertainty caused by Brexit. Until the negotiations start providing clear results of what the business environment for the region will look like after Britain leaves the European Union, it’s likely to stall some of the investor interest in the region’s assets. The question now becomes where all the capital is headed. Investors are surely getting a little anxious – buoyant fundraising mood requires strong performance or the next rounds won’t be quite as successful.