News: Funds – February 2002

€2bn Advent fund to focus On Europe
Advent International intends to invest 70 per cent of Global Private Equity IV, its new €2bn buyout fund, in Western Europe, with the balance going to North America and Asia.

?Europe is the best place for private equity at the moment?, said Will Schmidt, a managing director, after the closing of the fund in January. ?Of all the more mature markets today, Europe is the only place where private equity is playing a key role in the development and growth of the economy as a whole.?

Schmidt also said that Advent’s success on the fundraising trail was a clear indication of the rise in popularity amongst European investors of private equity as an asset class. Fundraising began at the end of 2000, and of the 35 new investor groups Advent brought in, 19 were European.

Investors in the fund include Abbey National, British Columbia Investment Management, CalPERS, Canada Pension Plan Investment Board, GE Capital, General Motors Investment Management, NIB Capital Private Equity, Partners Group, Robeco, funds managed by Standard Life, the State of Michigan and the University of Notre Dame.

Steve Tadler, a fellow managing director at Advent, commented: ?There is no doubt that the last year and a half has not been easy in the private equity market, so it made sense to look more broadly to attract investors. This was the first time we did so, and our success was down to the appreciation people in Europe have for what we have done in the region in the past.?

Europe has been an important source of deal flow for the firm for years. Its third fund made investments in companies including Vinnolit, Jazztel, CyberCity and Trinity Pharmaceuticals, while also investing, alongside Clayton Dubilier & Rice, in the carve-out of telecoms equipment maker Italtel from Telecom Italia.

GPE IV will invest in companies that are capitalised at between €100m and €500m, focusing mainly on business services, chemicals/ pharmaceuticals, later stage technology and media. Two investments have been made already ? Materis, a spin out of French cement maker Lafarge, and Datek, a North American ebroker.

BARING VOSTOK $55M OVERSUBSCRIBED
Baring Vostok Capital Partners, the Russian arm of Baring Private Equity Partners, has closed a buyout fund $55m above the original target set when fundraising began in 2000. The $205m fund is the first foreign vehicle in Russia since the region’s economic collapse in 1998.

The investors in the fund are mainly US, Canadian and Western European pension funds, said Mike Calvey, managing partner, who added the popularity of the fund was a reflection of investors’ awareness that Russia had recovered from the 1998 crisis.

Eight investments totalling $50m have already been made from the fund and a further six to eight are expected this year, said Calvey. ?But we see no need to rush. We have plenty of deal flow, and will move cautiously ahead. The competitive situation here is very favourable. We will take our time.?

The fund, Baring Vostok Private Equity, is aimed at companies operating in Russia, the Ukraine and other independent states of the former Soviet Union. Typically these companies operate in the oil and gas, telecommunications, technology, consumer and media sectors and have annual sales or asset values of $20m to $400m.

Charterhouse in €3bn fundraising
Charterhouse Development Capital (CDC), the London-based buyout house whose origins date back to 1934, has launched Charterhouse Capital Partners VII, a €3bn fund to invest in the UK and Western Continental Europe.

CDC, which has made few investments in recent years, said the timing was favourable to launch a new fund. Gordon Bonnyman, who leads the firm, said in a newspaper interview: ?We’ve seen the rain come on before, which those who have only been in the business since the early 1990s have not?, suggesting the firm and its team felt sufficiently experienced to make investments in the current market climate.

CDC’s latest deal was the purchase, alongside French house CDC Equity Capital, of Alstom Contracting, the electrical engineering and services division of the Alstom Group, in a €770m transaction in May 2001.

CDC currently has nine unrealised investments on its books. Its two previous funds, CCP V and VI, invested around €1.4bn in private equity deals from which it generated a cash return multiple of 3.5x before carried interest and fees, according to a source.

CDC was part of HSBC Group until 2001 when it completed its own buyout. The firm is now wholly owned by its employees.

Second HSBC fund at first close
HSBC Private Equity, the European private equity arm of HSBC Group, has held a first closing on £490m (€800m) for its second fund.

The group is looking to raise a total of £600m. HSBC Group will be matching investor commitments ?pound for pound,? which means the so-called Private Equity European Fund could total £1.2bn.

Since the vehicle was launched at the end of July last year, nine of the ten institutional investors in the firm’s first fund have reinvested, with the tenth expected to come in shortly. To the existing group the firm has added a number of new institutional investors, including a mix of European pension funds and insurance companies plus one US pension, said Vincent O’Brien, a director at HSBC Private Equity. It also has a £50m commitment from high net worth clients of HSBC Republic, a private bank HSBC bought two years ago.

?Interest in private equity from high net worth individuals is growing, and with this latest fund we have given this type of investor the chance to get involved?, said O’Brien, adding the group was in advance talks with a number of additional investors looking to get on board.

The group’s first fund, HSBC Private Equity Partnership Scheme, raised £1.1bn. It is now fully invested and has completed 35 realisations from 55 investments. Composite IRR for the fund is in excess of 30 per cent, according to the firm.

TechFund raises €25m for Europe
TechFund Capital, the Silicon Valley venture capitalist, has secured €25m for the first closing of its new European seed and early-stage venture capital fund, TechFund Capital Europe. Investors in the fund include the European Investment Fund, Caisse des Dép^ts et Consignations, EDF and Thomson Multimedia.

The target set for the vehicle is €100m by the middle of the year. A Paris-based team of managers led by Jean-Michel Barbier and formerly of Thomson-CSF Ventures (now Thales Corporate Ventures) will manage the fund. The team left the corporate venturing arm of the French defence contractor to establish TechFund’s European presence.

?Today there is a wealth of attractive investment opportunities for seed and early-stage venture capital investing in core technologies in Europe,? said Barbier. He added that there were three important investment trends the firm would be trying to take advantage of: ?the huge reserve of attractive and untapped technologies in Europe; the rapidly expanding trend toward entrepreneurship in Europe; and the fact that the established VC industry is currently focusing on laterstage investments and spending more time with existing portfolio companies.?

TechFund Capital Europe will target companies operating in the enabling technologies sector such as networking, telecommunications, wireless, and multimedia.

Advantage raises for UK midmarket
Advantage Capital, the London-based private equity firm set up in 2001, has announced a first closing of its private equity fund at £10m (€16m).

The firm, founded by Trevor Jones, a former Gresham Trust executive, and Martin Bodenham, a corporate finance specialist and former partner at KPMG and Ernst and Young, said over 20 investors have signed up to the fund. The investor base includes institutions as well as high net worth individuals.

Targeting UK buyouts with a transaction value of up to £30m, the fund is looking to specialise in what the firm calls ?difficult deals with real merit?. These may include investments in companies that operate in unpopular sectors or involve newly configured businesses whose trading history is too short to be particularly meaningful. The firm said it would ?adopt a non-herd approach to investing and will consider each deal on its underlying merits. Management will always be key.?

Lloyds TSB Development Capital has contributed 25 per cent of the commitment received to date. The firm has signalled its interest in investing alongside Advantage, thus affording the firm access to larger amounts of capital if necessary.

Looking for a total of £40m, the fund is expected to remain open until the summer of 2002. Advantage said interest in the fund was strong at a time when many other private equity firms were retrenching.

Aon in $450m securitisation
on, the global insurer, has securitised a $450m portfolio of private equity investments. The deal is the first-ever securitisation of such a portfolio to receive stand-alone credit ratings from Standard & Poor’s. The portfolio of private equity investments were previously held by Aon’s insurance underwriting divisions, Combined Insurance Co. of America and Virginia Surety Company Inc., which the group is preparing to spin off. Patrick Ryan, the group’s chairman and CEO, commented: ?We plan to spin-off our insurance underwriting businesses under Combined Specialty Corporation in Spring of this year, and we believe the securitisation will be desirable to investors, rating agencies, and regulators. Importantly, the transaction enables a less variable investment income stream and increased liquidity. We will also retain a substantial interest in the economic potential of the investments, which we believe will be favorable over the long-term.? To complete the securitisation, a new vehicle was created which sold securities worth $180m to investors. The remaining 60 per cent of the assets will be held by Aon.

Hicks, Muse closes on $1.6bn
Texan private equity house Hicks, Muse, Tate & Furst has closed its fifth buyout fund at $1.6bn, short of the $4.5bn target set in 2000. The group’s previous fund, which closed at the end of 1998, had raised $4.1bn.

Carlyle promotes energy fund
The Carlyle Group, the global private equity and alternative asset manager, is understood to be seeking investors for its second global energy fund. The target for the fund is set at $1bn, expected to be secured within a year. The fund will look for investment opportunities around the world and invest between $50m and $150m in energy deals.

Cofiri unveils Improvement 1
Cofiri Invest, a division of Italian investment bank Cofiri, has announced plans to raise a €200m buyout fund. The fund, called Improvement 1, will target European midcap companies preferably operating in energy, leisure, media, chemicals and retail.

Dresdner eyes India
Dresdner Kleinwort Capital, the private equity arm of Dresdner Bank, is looking to raise a $200m venture capital to invest in information technology, biotechnology and media companies in India. The firm expects to hold a first close in March and a final close in June.

Blackstone has €800m for property
The Blackstone Group, the international investment banking boutique, has closed its fourth real estate fund, Blackstone Real Estate Partners International, on €800 million. Credit Suisse First Boston helped raise the fund, which was oversubscribed by €200m. Limited partners in the fund include corporate and public pension funds, high-net-worth individuals, and financial institutions from the US and Europe.

Schroders FoF has €172m
Schroders, the asset manager, has raised €172m at the first close of its inaugural fund of funds. A final closing at €300 is scheduled for the middle of 2002.

Nomura to invest in Terra Firma
Nomura International, the Japanese investment bank has agreed to invest in Terra Firma Capital Partners II, the €3bn private equity fund that its outgoing head of principal finance Guy Hands is raising. Nomura will contribute 10 per cent to the fund’s total capitalisation.

Investors keen on emerging energy
Sustainable Asset Management (SAM), the Zurich-based fund manager, has completed its debut private equity related fundraising effort at €86m. SAM initially looked to raise a €40m fund aimed at the emerging energy, resource productivity and health and nutrition sector, but strong demand prompted the firm to more than double the size of the fund.

Wilton closes below target
Wilton Asset Management, a joint venture between State Street Global Advisors and DuPont Capital Management, has closed its Wilton Private Equity Fund at $240m, $60m short of its original target. The fund is aimed at international buyout, growth financing and venture capital opportunities.

GMA and ProVen merge
GMA, the US private equity firm, has agreed to acquire its UK affiliate ProVen Private Equity for an undisclosed sum to create Beringea, a firm with more than $275m under management and a portfolio of some 50 investments. Beringea will be run by former ProVen chief Gordon Powers who will be chairman.

Lehman closes jumbo property fund
Lehman US investment bank Lehman Brothers has closed Lehman Brothers Real Estate Partners fund at $1.6bn, $600m above target. It invests in real estate, operating companies and service businesses ancillary to the real estate industry, primarily in North America but also Western and Central Europe.