European Fund Briefs, July 2011

Open Ocean Plots Course to First Major Fund

Espoo, Finland-based Open Ocean Capital has sailed to a €40 million (€59 million) first close of its so-called Fund Three.

Fundraising began in mid-2010. Investors include the European Investment Fund, a pool of Finnish pension funds, state-vehicle Finnish Industry Investment and the Open Ocean management team, which invested €8 million ($12 million).

Despite the name, it is actually Open Ocean’s second fund. Open Ocean One refers to the MySQL open source database sold by the firm’s management to Sun Microsystems for $1 billion in 2008.

“We have a Fund Two with about $5 million in capital, invested in six companies. However, for that fund we did very little active promotion and picked up cases primarily from our contact network. We even did some seed stage, which we don’t really plan any more,” Open Ocean Managing Partner Patrik Backman told VCJ.

The new fund will focus on European startups developing open-source technology, investing about $1 million initially and raising that sum to a maximum of $8 million per company, depending on performance, in return for equity stakes of up to 40 percent.

By the end of the year Open Ocean plans a final close for its latest fund at €60 million ($88 million).

RiverRock Closes on Debut Fund

After nine months of fundraising, RiverRock European Capital Partners has announced a €76 million ($111 million) first close on its direct lending fund.

“We had a pretty good response,” RiverRock Partner Jason Carley told VCJ.

“In the current market, investors are being selective but it was a good process from our point of view,” he said.

Taking a multi-sector approach, investing from €5 million to €15 million ($7 million to $22 million) at a time, the fund will target healthy European private and family businesses in need of refinancing, working or growth capital.

“So many of the traditional financing sources have disappeared and there are many good businesses out there that aren’t able to attract capital without giving up control,” said Carley, commenting on RiverRock’s focus on debt rather than equity financing.

He added that the firm was also interested in later stage venture capital-backed businesses.

Cornerstone investment for the European Opportunities Fund came from the European Investment Fund. Other investors included family offices, institutional investors and RiverRock management.

The fund will begin investing from June 2011, with final close at €250 million ($366 million) expected within a year.

ICG Begins PE Debt Fund

Mezzanine finance provider Intermediate Capital Group has launched a €2 billion ($2.9 billion) fund to exploit a predicted gap in the market for the refinancing of European buyout debt.

London-based ICG notes that, beginning this year, a slow-down in the recycling of loans should leave a €50 billion ($73 billion) capacity shortfall in the syndicated loan market.

“Unlike the U.S. market, where significant efforts have been made to extend the maturity of leverage loans, the wall of maturing European debt has yet to be tackled,” ICG stated in its annual results.

Fundraising will continue into 2012 with ICG seeking €1.5 billion ($2.1 billion) from institutional investors to add to the €500 million ($714 million) it will commit itself.

Sources close to ICG say the fund could grow beyond €2 billion ($2.9 billion), depending on requirements.

It follows the €3 billion ($4.3 billion) ICG European Fund IV, raised in 2006, 92% of which has now been committed, with the remainder reserved for follow-on investing.

BGF Open for Business

Following its official launch on May 19, the United Kingdom’s bank-backed Business Growth Fund is considering 10 initial investments.

One out of 10 applications under consideration by the fund has been accepted so far, according to the Financial Times.

The £2.5 billion ($4.1 billion) fund was launched in October 2010 as a response to restricted bank lending; it now has offices in Edinburgh, London and Birmingham.

Targeting businesses with annual sales from £10 million to £100 million ($16.2 million to $162 million), the BGF aims to provide funding to companies that are too large to attract angel investors, but too small to secure bank credit.

Hundreds of British businesses will gain support over the next few years, with the fund investing from £2 million to £10 million ($3.2 million to $16.2 million) at a time in return for a minimum 10% equity stake.

Turkey Targeted for New PE Fund

Abu Dhabi’s Invest AD is teaming up again with Japanese financial conglomerate SBI Holdings to set up a $100 million private equity fund in Turkey.

Based in Istanbul and seeded equally by Invest AD and SBI, the fund will target the consumer goods, food, retail, services, pharmaceuticals and health care sectors.

In 2009, Invest AD took a significant minority stake in Turkish business Ekol Logisitics, and it says that it may open certain future acquisitions to other investors.

SBI and Invest AD established a $100 million, multi-asset African fund in 2010 and both companies say they will open similar funds to investors in the future.

Invest AD was originally set up to invest on behalf Abu Dhabi’s government but has since 2007 sought to attract third-party mandates.

It has committed itself to long-term involvement in Turkey, which its CEO describes as a “strategically important country in the region.”