Virgin develops private equity strategy

Soon after PEO revealed that the Virgin Group is launching its first institutional buyout fund, its chief executive has reportedly outlined plans to pursue a ‘branded venture capitalism’ strategy, as it looks to take on large buyout firms like Blackstone and Apax.

The UK-based Virgin Group, which recently launched its first institutional buyout fund, has reportedly acknowledged that large buyout firms – several of which are currently circling its cable business Virgin Media – are likely to be its key competitors in the future.

When PEO reported the launch of the new $400 million (€289 million) Virgin Green fund last month – the group’s first to employ third-party institutional capital alongside its own – an investor described Virgin as: “effectively a consumer brand-focused private equity house”.

Stephen Murphy, Virgin’s chief executive, told UK newspaper The Times that the group planned to pursue a “branded venture capitalism” strategy, using its powerful name to start, run and exit businesses like a standard buyout firm: “We think of our peer group now as being people like Apax and Blackstone,” he said.

This would include making greater use of the public markets, he told the Times: “Once we have built a company to a point where it has reached a level of stability and maturity we will seek a public exit. We are much more comfortable with that idea now but there are no firm targets of how many businesses we want to float.” The company is currently pursuing a New York listing for Virgin Mobile USA and could also seek to float health club Virgin Active, according to the newspaper.

At the same time, Virgin is also courting private equity buyers for its businesses. The group recently appointed Goldman Sachs to conduct an auction for cable company Virgin Media, following an initial approach from The Carlyle Group. However, it decided to postpone the sale this month after the problems in the credit markets made it difficult for buyout groups to finance their bids.

The recent launch of the $400 million Virgin Green fund was the group’s first foray into institutional private equity. Virgin will contribute about $100 million to the vehicle, which will invest in renewable energy and efficiency projects, with the remaining capital drawn from third-party investors. The fund will be led in the UK by Shai Weiss, and is likely to deploy up to $75 million in equity per transaction, plus debt where appropriate.