Lyceum Capital, the private equity backer of cafe chain Eat, is slashing its team after failing to raise a new fund.
The 19-year-old firm, one of the UK’s oldest buyout houses, was targeting between £375m and £400m for its fourth fund.
But after failing to receive enough commitments from investors, Lyceum called time and announced it would switch to a deal-by-deal investing model.
Sources close to the firm said the flop was down to a “significant number” of previous investors deciding not to return for its next fund, for reasons “unrelated to Lyceum”.
But one industry source told City A.M. that though there are significant amounts of capital seeking places in private equity funds, investors are still looking for stand-out performance. The seven exits made by Lyceum from its second fund have generated a decent return of 2.6 times money invested.
Added to that, many investors have said that the UK has become a less attractive place for private equity since the Brexit vote.
The newly restructured firm will be led by former managing partner Jeremy Hand and deal origination expert Simon Hitchcock.
A source close to Lyceum said that the firm was involved in legal consultation as it looked to slim its team through redundancies.
However it plans to keep investing, focusing on technology and tech-enabled services companies.
It may now look at wider opportunities than it could when investing through a traditional closed-end fund, such as deals outside the UK, those which are larger or smaller than its usual ticket size, deals which involve it taking a minority stake and longer term “patient capital” investments.
Lyceum’s previous fund invested in 11 companies, which together employ around 2,200 staff and generate revenues of more than £300m.
None of these businesses have yet been sold, but Lyceum plans to begin realising the investments towards the end of this year.