Pet retailer Jollyes former owner Kester Capital sees robust demand for new fund

Kester Capital’s latest fund has closed £50m ahead of target at £200m as the low-to-mid-market private equity firm attracted new blue-chip institutional investors.

The firm announced on Tuesday that its oversubscribed Fund III had closed at its hard cap of £200m, surpassing its £150m target.

It is more than double the size of Kester’s previous fund, with an investment strategy focused on primary buyouts in the healthcare and technology sectors.

Kester noted that Funds I and II had delivered three consecutive exits with a return of more than four times the initial investment and seven straight exits with a return of three times.

It most recently sold pet retailer Jollyes to TDR Capital for a 4.2x return.

Rapid interest rate hikes dampened dealmaking globally last year, pushing up the cost of financing.

UK mid-market private equity activity dropped 20 per cent last year, according to KPMG, with financial services being the sole sector to see an uptick in dealmaking.

However, the sector is showing signs of a rebound this year as central banks are expected to start cutting interest rates in the coming months as inflation cools.

Kester said on Tuesday it had attracted a number of new blue-chip institutional investors from the US, Europe and the UK, on top of support from existing investors.

The firm has committed 10 per cent of Fund III’s carry to the Kester Foundation, which was established in 2022 to support different charities and not-for-profit organisations.

Adam Maidment, managing partner at Kester, commented: “This is the next step for Kester – hitting our hard cap and attracting so many new, high-quality LPs alongside our long-standing supporters, all in a challenging market. That’s testament to the hard work our management and investment teams are putting in every day and proof of our strategy. We are very proud of the top decile returns we have been delivering for our investors.

“This fund is particularly special for us too as we launch the Kester Foundation alongside it. With 10% of carry going into the Fund, we hope to make a meaningful impact and share our success with important and deserving charitable causes.”