ABN AMRO, the Dutch bank at the heart of a fierce bidding war between Barclays and a consortium led by RBS, is spinning out its private equity operations in a bid for more third party money for its buyout and expansion capital unit.
The bank said yesterday at its first quarter results presentation it was taking steps to transfer the investment management function of most of its private equity businesses to an affiliate, in which the teams will have independent operational and commercial authority.
ABN AMRO’s buyout business operates through seven teams in Europe and Australia. It also has a corporate investment team, which provides development and expansion capital on a temporary basis. The two lines combined have €2.6 billion under management and reported profits of €99 million for the first quarter.
The move to give ABN AMRO Capital more autonomy raises a question mark about the position held by its mid-market rival and potential bed-fellow Barclays Private Equity, the semi-captive arm of the UK bank in pole position to take over the Dutch bank.
Barclays Private Equity’s longer track record of managing third party money – the bank contributed just 40 percent of its most recent fund and is expected to make up less of the fund currently on the market – would also make it a prime candidate for independence. It raised €1.65 billion in 2005 and is said to be targeting around €2 billion in the second half of this year.
ABN AMRO has made a €2 billion long-term commitment to be invested in mid-market buyout opportunities in the Dutch, UK and Nordic markets. The unit manages €247 million of third party money to date.
By hiving off the management of its private equity funds ABN AMRO said it has reduced its active involvement in its private equity investment management activities, particularly buyouts, while continuing to benefit from the very good returns that the business has generated.
It said while the investment management activities will be transferred, the existing portfolio will continue to be owned by the bank.