Eurazeo used strip sale to seed flagship fund – exclusive

Lexington Partners, Adams Street and StepStone were part of a consortium that acquired five assets off Eurazeo's balance sheet which were used to seed the €700m Eurazeo Capital IV buyout fund.

Eurazeo has used a secondaries process to help raise its latest flagship buyout fund.

The Paris-headquartered investment manager sold a strip of five assets off its balance sheet to a syndicate led by Lexington PartnersSecondaries Investor reported in October. According to a source familiar with the deal, these assets were then used to seed flagship buyout fund Eurazeo Capital IV, which held its final close in July on €700 million.

The syndicate also included the secondaries platforms of Adam Street Partners and StepStone Group. It is understood that Lexington also made an additional stapled commitment to the fund. Capital from Lexington accounts for €200 million of the total raised for Fund IV.

The five companies in the strip were US digital marketing group Trader Interactive, Spanish fragrances producer Iberchem, US education provider Worldstrides, French risk insurer Albingia and Dutch ophthalmic technology company Dorc. The deal was priced at par to net asset value against a mix of reference dates.

Secondaries Investor first reported in October that Lexington was to lead a syndicate in acquiring a portfolio of direct stakes off Eurazeo’s balance sheet. It is understood that Campbell Lutyens advised on the process.

Fund IV, which will invest in North American and European mid-cap companies, raised €700 million – a 40 percent increase on its predecessor. The firm co-invests off its balance sheet in conjunction with its private closed-ended funds.

The firm closed a similar secondaries deal in 2017 in which it raised €500 million in third-party capital for Eurazeo Capital II and invested it in a portfolio of assets it already held. The fund took a 25 percent stake in the portfolio with the remaining 75 percent staying on the balance sheet.

Strip sales accounted for 34 percent of GP-led transactions by value in 2018, more than restructurings or tender offers, according to Campbell Lutyens.

Eurazeo did not return a request for comment. Lexington Partners, Adams Street, StepStone and Campbell Lutyens declined to comment.