London-based Duke Street, a mid-market buyout shop, has restructured its sixth private equity fund into a hybrid funding model. Goldman Sachs is the lead investor in the restructuring of Duke Street Fund VI with support from Spanish advisory firm Arcano. Lazard is managing the process. Duke Street Fund VI raised 963 million euros in 2007.
Duke Street, the mid-market private equity firm, is pleased to announce a restructuring of its sixth fund in a process that offers the firm enhanced funding for significant transactions.
Duke Street Fund VI, established in 2006, has concluded a review managed by Lazard to offer liquidity to Limited Partners (LPs). A number of these had been considering the age of their own underlying funds. Equally, other LPs have not necessarily viewed private equity as core to their investment strategies since the global financial crisis of 2008.
Goldman Sachs has emerged from the Lazard process as the lead investor in this restructuring, with additional support from Arcano, the major Spanish investment group. Lazard entertained only formal offers, backed by existing capital, from parties experienced in secondary transactions and with a strong understanding of the Fund VI portfolio assets.
The proposal was supported by 89% of Fund VI investors, with 50% of LPs liquidating their commitments. The remaining LP commitments in Fund VI will be transferred to a new vehicle containing a strong portfolio of the fund’s six remaining assets, including Wagamama and The Original Factory Shop. The long term realised track record of Fund VI since 2008 has been 2.3x with 29% IRR.
Duke Street adopted a deal-by-deal funding model in 2012, drawing on a ‘club’ of approximately 20 LPs to co-invest in five transactions with a combined enterprise value of more than £700m. Two realisations so far from this model have delivered a combined return of more than 3x.
The Fund VI restructuring progresses this deal-by-deal approach to a hybrid funding model. This will comprise formal capital from a Cornerstone Fund, backed by Goldman and Arcano, which will commit up to 50% of equity investment in new deals. This traditional blind pool will be supplemented by Duke Street’s club of co-investors, several of which have already supported more than one deal, plus the firm’s own General Partner contribution.
Commenting on these changes, Partner and Head of Fundraising James Almond said:
“Having been pioneers of deal-by-deal funding in the European midmarket, we are pleased to have developed a hybrid model that gives us even more firepower for transactions. This model ensures maximum alignment between investors, management teams and Duke Street’s own investment criteria. It also gives us flexibility and certainty of funding, which will ensure timely execution.
We are delighted to have secured overwhelming support for this restructuring from Fund VI LPs and look forward to working with those staying in the new vehicle as we maximise the value of the fund’s assets. As Duke Street begins a new phase of growth, we welcome the support of Goldman and Arcano in what promises to be an exciting journey.”
About Duke Street
Duke Street is a leading operationally focused European mid-market buyout group, founded in 1988. It invests across four sectors: healthcare, services, consumer and industrials. Duke Street has a proven model of value creation by successfully transforming businesses through implementing operational change and buy-and-build, having made [nearly 60] bolt-on acquisitions for its portfolio companies. The firm is supported by its strategic partner and shareholder, Tikehau Capital, a leading alternative asset manager investing across public and private debt, equity and real estate, with more than EUR 7 billion of assets under management.