The recent closing of Access Capital Partners' latest fund of funds provided evidence that the credit crunch has had some beneficiaries. With its focus on backing mid-market funds with a low dependence on debt, the Paris-based manager was able to close its ACF IV Growth Buyout Europe fund on €425 million ($663 million) – well ahead of its €300 million initial target.
According to managing partner Philippe Poggioli, average gearing across Access' portfolio currently stands at 3.5 times EBITDA, while the average debt to equity ratio is 50:50. He says: “Investors are beginning to realise that over-gearing assets can pay off very nicely for a while but the party comes to an end. Over ten years, we have backed low gearing strategies with a strong growth orientation. Such strategies can match more sustainably what larger buyout funds can only deliver in the best of times.”
Poggioli says that, during the last nine months of fundraising, Access had discussions with LPs actively looking to reallocate resources away from larger funds and into the mid-market space. “It was a common theme,” he reflects. He adds that, on the downside, this has created the danger of over-crowding at the upper end of the mid-market. On the other hand, he says the lower mid-market is seeing no discernible increase in competition levels.
Access experienced particularly strong interest from investors based in Germany, which ended up accounting for around half of the fund's total commitments. “We've seen German LPs really getting organised to tackle the asset class,” notes Poggioli. He adds that most interest in Germany traditionally came from insurance companies, but that appetite has now extended to corporate and public pension funds as well.
Within the mid-market, Access seeks to identify niche strategies. Poggioli says it has recently supported Endless and Solidus, two turnaround specialists based in the UK and Germany respectively, and HitecVision, a Norwegian fund focussed on the oil and gas services industry.
DUTCH MID-MARKET SPECIALIST HITS CAP
Egeria, an independent Dutch mid-market buyout firm, has closed its third fund on its hard cap of €500 million ($796 million) at first closing. Interest from both existing and new investors was strong and the fund was cons ide rably over subscribed. Commitments came from Dutch and international institutions and family offices including investors from North America and Europe. Dermot Crean, partner at placement agent Acanthus Advisers, said: “There was plenty of demand. The target had been €400 million. There is still quite a lot of long-term money and where are you going to put it? In the mid-market there is still a bit of scarcity value around good firms with track records.” Egeria, established in 1997, targets controlling stakes in mid-market companies in the Netherlands or in companies with a Dutch link. It invests in firms with a proven record operating in stable, growing markets.
PARTNERS SEES AUM GROW, NET ASSET GROWTH SLOW
Partners Group, a global Swiss-based alternative asset manager, said its estimated assets under management as of 30 June 2008 had increased by CHF1.0 billion ($974 million; €621 million) to CHF25.4 billion compared with the previous year. Overall direct asset growth, including new assets raised and changes to existing investment programmes, amounted to CHF3.8 billion. Partners Group's private markets business lines, which comprise private equity, private debt and private real estate, have enjoyed sustained demand with direct asset growth of CHF3.5 billion, corresponding to an annualised growth of 39 percent. Net asset growth was temporarily slowed by CHF1.4 billion of primarily adverse foreign exchange developments and to a lesser extent negative performance effects in the liquid strategies and redemptions of CHF1.4 billion in its hedge fund business. Partners Group is in the process of redefining its hedge fund strategy, it said, in an increasingly challenging and highly correlated public market environment.
NEW SWISS BASE FOR AXA PE
AXA Private Equity, the private equity arm of French insurer AXA, has opened an office in Zurich in response to investment opportunities in the Swiss market. The Zurich office will enable AXA Private Equity, which already has offices in Paris, London, Frankfurt, Milan, New York and Singapore, to strengthen its international presence and its links with Switzerland-based AXA Winterthur. The office, which will be managed by Martin Kessi, will oversee AXA Winterthur's existing portfolio of private equity investments, as well as develop additional services and customised products for Swiss private banks or family offices. Kessi's team also aims to secure secondary deals on private equity portfolios held by large local institutional investors.
CAPITAL DYNAMICS OPENS IN MUNICH
Capital Dynamics, a global private equity asset manager, is opening an office in Munich. It said the mover eflected the strategic importance of the German market and an increased demand from German investors in products and services offered by the firm. The office will be staffed by both senior investment and business development executives. Katharina Lichtner, one of the founders of Capital Dynamics and managing director of the German entity, said: “We want to be close to our investments and our clients in order to offer superior services. We are already seeing an increased interest from local institutional investors in our products and services.”
METALS GIANT LAUNCHES CLEANTECH FUND
Luxembourg-based metals and mining firm ArcelorMittal has launched a $50 million (€32 million) clean technology fund and a €100 million carbon fund. The clean technology fund has initially been funded with $50 million although a company spokesman said ArcelorMittal may decide to increase this amount in the future. Sectors targeted within cleantech include solar, wind, biofuels, carbon sequestration, demand management and waste heat utilisation. ArcelorMittal's clean technology fund will work in partnership with four California-based venture firms: Bessemer Venture Partners, Khosla Ventures, Kleiner, Perkins, Caufield & Byers, and Vantage Point Venture Partners. However, the venture firms are not limited partners, according to a source familiar with the fund. The carbon fund will target investment opportunities with the potential to generate carbon credits under the Kyoto Protocol. Sectors for investment include renewable energy, energy efficiency, methane capture and greenhouse gas-reducing technologies. Both funds will focus on technologies that have relevance for the steel industry and its customers.
NBGI LAUNCHES NEW FUND, PARIS OFFICE
NBGI Private Equity, the London-based buyout shop, has launched its first dedicated French fund targeting €100 million ($159 million) in equity commitments. The fund is part of the firm's expansion into France, and comes as NBGI opens an office in Paris. The Paris operation is being led by former NewBridge Partners cofounder Didier Riebel and Laurent Allégot, previously managing director with SPEF LBO, a subsidiary of Natixis Private Equity. The fund will focus on buyouts and recapitalisations of small to medium-sized companies as well as growth equity investments, with investments of between €3 million to €15 million per transaction. Riebel said the team was not concentrating on specific sectors within France but more on “company situations, whether it be capital development, a traditional LBO or even a turnaround. We are interested in the situation of a company rather than the type of investment.”
HITECVISION WRAPS UP FUND WITH SECONDARIES DEAL
HitecVision, the Nordic oil and gas specialist, has exited the last of its private investments in its third fund with the sale of three investments to Cubera Private Equity, a secondaries specialist. Pâl Dahlberg, HitecVision's chief operating officer, said: “The fund had one year left to run and we still had three portfolio companies, which were doing well. We didn't want to force an exit. Everyone's better off if they go to another private equity investor.” The investments that have been sold to Cubera are: RigNet, a provider of communication services to the oil and gas industry; SPT Group, a modelling software provider for the oil and gas industry; and Norse Cutting & Abandonment, an international service provider to the oil and gas industry, focusing on mature fields. HitecVision Private Equity III was established in 2002 with committed capital of NOK690 million (€86 million; $135 million), and has invested in a total of nine portfolio companies.