The target for Audax Group’s debut fund focusing on a kind of hybrid between secondaries continuation funds and straight-up non-control M&A investing has been revealed in US public pension documents.
The Boston-headquartered firm’s Audax Strategic Capital I is targeting $600 million and is expected to hold a final close in the first quarter of 2025, according to documents prepared for an 18 February Anne Arundel County Retirement & Pension System board meeting. The pension fund’s adviser, NEPC, has recommended a $20 million commitment to the vehicle.
The vehicle, which will invest across assets in North America and Europe, has a hard-cap of $750 million, according to the documents. US Security and Exchange Commission documents from 17 January show the vehicle had raised $470.5 million.
Fund I will focus on providing strategic capital to lower-mid- and mid-market buyout GPs in the middle of their hold periods to grow their “leading assets through acquisitions – an alternative to single-asset continuation vehicles”, Anne Arundel County’s documents show. Its deals will be structured as common, convertible and preferred equity. The fund already has a seeded portfolio of five assets.
The strategy is targeting companies with an EBITDA between $10 million and $75 million. Its target deal size is cheques between $25 million and $50 million.
Fund I is targeting a 20 percent net IRR and a 2x net multiple, according to the document. It has an 8 percent preferred return with carried interest set at 12.5 percent. Management fees will vary depending on the commitment, going from 1.25 percent for commitments less than $25 million, 1.15 percent for $25 million to $49 million and 1.05 percent for tickets of $50 million or more. Audax will make a GP commitment of at least 20 percent to the vehicle.
Audax declined to comment on the fundraise.
Audax revealed the strategy in late 2022 following the hire of Kumber Husain and Daniel Green from DWS Private Equity, Secondaries Investor reported at the time. The pair had been working to build out DWS’s secondaries focus.
“We’re targeting deals where we can put capital to work for M&A purposes, add-ons and growth in companies in collaboration with sponsors,” Green told affiliate title Buyouts at that time. “A good example might be a company that’s been under ownership of the manager for a couple years that finds a sizeable peer it would like to acquire… but needs additional equity to execute the deal.”
The strategy’s opportunity set could include secondaries continuation fund deals, both Green and Husain said in 2022, adding that the strategy is not primarily focused on secondaries, which are generally understood to include a liquidity option for limited partners.
Last year, GP-led transactions accounted for 42 percent of the total $155 billion in secondaries deal volume, according to Campbell Lutyens’ Full Year 2024 Secondary Market Report. Single-asset CVs made up more than half of the $65 billion GP-led volume and increased 80 percent from 2023.
