Despite reports to the contrary, London buyout shop BC Partners Ltd. is bucking the trend of problems facing other European private equity firms.
By the time the investment period for BC Partners' €5.5 billion ($8.3 billion) eighth fund expires in November 2011, the London buyout shop expects the 2005 limited partnership to be over 80% invested, with only 10% to 15% set aside for follow-on action for existing portfolio companies. A flurry of deals in the past few months means the fund is close to 70% invested.
BC Partners' recent activity includes
- The €500 million merger, announced in September, of German medical laboratory Synlab GmbH and its Austrian counterpart FutureLab Holdings GmbH;
- The $350 million subscription for convertible preference shares at Boca Raton, Fla., office supplies retailer Office Depot Inc. (NYSE:ODP), in June; and
- The $1.66 billion buyout of Istanbul, Turkey-based supermarket chain Migros Turk TAS announced in February.
You could look at BC Partners' injection of €100 million into the refinancing of its Derby, England, heating products maker Baxi Group Ltd. as part of Baxi's merger with Dutch rival De Dietrich Remeha Group in a good light or bad. That deal, which closes in the next few days, could be a follow-on investment or a rescue financing, depending on your point of view. Either way it is still an investment, which will require the draw-down of limited partner funds.
So a story in London's Daily Telegraph newspaper on Monday suggesting the fund had proposed extending the investment period to November 2011 in order to continue charging a substantial management fee got short shrift from people close to BC Partners. So did the claim that limited partners delivered the firm a humiliating blow by rejecting the proposal. There was no proposal to any or all of the LPs, these people said, and hence no rejection. True, the notion was raised, among other ideas, in conversations earlier in the year, when the market looked much worse than it does today, but nothing came of it.
Still, with other buyout firms, such as Paris-based PAI Partners, coming under severe pressure from their LPs to reduce fees, cut the size of their funds and generally give their investors more power, it is not hard to understand why private equity is in the spotlight at the moment. PAI's had a particularly difficult time, with LPs forcing the resignation of its top partners and installing an outsider, Lionel Zinsou, to put the business back on track. Zinsou has reportedly been negotiating with 140 investors to cut the firm's €5.4 billion fund down to size -- reportedly offering to allow investors to take out as much 50% or even 60% of uninvested funds and to bring down the majority of investors needed to replace the board from 80% to 60%. But times are tough throughout the private equity industry, with a number of funds having to renegotiate terms with reluctant LPs.
BC Partners may not have tried to postpone the deadline and may still be on track to do a few more deals in the coming months, including IPOs for some of its biggest investments, such as specialist German chemicals carrier Brenntag AG or Spanish online air ticket booking agency Amadeus IT Group SA. But raising money next year for a new 2010 fund may well be a tougher call than its fundraising in 2005. - Jonathan Braude
Continue reading below
