Inflexion Raises $3.3 Billion for New Mid-Market Buyout Fund

(Bloomberg) -- Inflexion Private Equity has raised 2.5 billion pounds ($3.3 billion) for its latest flagship buyout fund on the back of a record year for the British firm.

The mid-market specialist drew in money from new and existing investors across Asia, Europe, the Middle East and U.S., according to a statement Tuesday. Fund VI will invest in growth companies with enterprise values of as much as 1 billion pounds and target the business and financial services, consumer, health care, industrials and technology sectors in the U.K. and western Europe.

Inflexion's new fund is double the size of its predecessor. It highlights investors' continued desire to pour money into private equity -- and the mid-market -- even as the historic period of low interest rates that helped juice returns in the sector gradually comes to an end.

“Interest rates are structurally still quite low,” said Simon Turner, managing partner at Inflexion, in an interview. “If you think what a buyout is, the leverage helps you buy the business, so as long as interest rates stay relatively low a bit of inflation can actually help a bit.”

Turner's firm had a record year of dealmaking in 2021, with eight exits returning 1.6 billion pounds to investors, 12 new investments and 97 acquisitions by portfolio companies. Deals included the sale of an investment in U.K. veterinary clinic Medivet to CVC Capital Partners, the disposal of Halo Technology Group to Amphenol Corporation -- at a six-times money multiple -- and building-supply retailer Huws Gray to Blackstone Inc.

There is more to come. Inflexion is weighing options for Radius Payment Solutions, including a sale that could value the U.K. fuel cards and telematics firm at about 2 billion pounds, Bloomberg News reported in January.

To be sure, the frantic pace of mergers and acquisitions and private equity dealmaking that drove more than $5 trillion of transactions last year is beginning to show signs of fatigue in Europe, exacerbated by Russia's invasion of Ukraine.

Buyout firms are now assessing their portfolios for potential exposure and the recent market correction will have a knock-on effect on private market valuations and the willingness of sellers to dispose of assets.

Turner said he wants to focus on continuity for the firm, which is one of the biggest mid-market investors in Europe.

“Going from 1.25 billion pounds to 2.5 billion pounds is a big step and that implies change. Part of what I am focusing on is continuity,” he said. “Where it gets problematic is when you raise too much money and you have to re-learn your skill set.”

Inflexion also invests via a partnership fund that focuses on minority investments, as well as a lower mid-market vehicle. Turner said Inflexion has no plans to follow other private equity firms in going public.