Apax, Saunders Karp to merge

The US arm of Apax Partners, the global private equity firm, and US middle-market veteran Saunders, Karp & Megrue will combine operations with John Megrue and Allan Karp at the helm.

The US arm of Apax Partners and American middle-market buyout firm Saunders, Karp & Megrue will merge operations, creating what its backers hope is a more “balanced, global private equity firm”.

The two firms plan on announcing the proposed merger today. Apax Partners, which has headquarters in London and New York, and Saunders Karp, with headquarters in Stamford, Connecticut and New York, have submitted the merger for approval to limited partners.

The proposed merger would see Saunders Karp partners John Megrue and Allan Karp become co-chief executive officers of Apax Partners' US operations. Megrue and Karp will also join the global executive committee of Apax Partners, according to a letter to LPs.

Apax Partners US partners George Jenkins, Salem Shuchman, and Lori Rafield, specialists in financial services, leveraged transactions and healthcare, respectively, will take “early retirement”, according to the letter. Apax partner David Landau 'has decided to leave prior to the next fundraising', the letter read. Jenkins will “remain with the firm to manage a successful transition”. No further information was immediately available.

In 2002, UK-based Apax Partners merged its European and US operations as part of a strategy to more closely align the firm’s transatlantic businesses. The New York-based “sister firm” was previously named Patricof & Co. Ventures, founded by Alan Patricof in 1969. Patricof now has a minimal role in the day-to day-activities of Apax.

Apax Partners is led by CEO Martin Halusa and chairman, Sir Ronald Cohen. Despite the unity of the US and European Apax branches, the two sides have yet to raise a transatlantic fund. An investment advisor familiar with the group said, “Apax Europe has always had the stronger franchise”.

Apax US is better known for its venture activity while the European operation, which recently held a €3 billion ($4 billion) first close on its sixth fund, has concentrated on buyout investing in recent years.

The letter to LPs said the merger with Saunders Karp was born of Apax's desire to build upon Saunders Karp's US buyout expertise. The letter read: “[Saunders Karp] is a market leader in private company recapitalisations and growth company buyouts in the middle market”.

The letter added the merger was the next step in “building an institution that is truly global”.

In order for the merger to be completed, the majority of limited partners in the Apax Partners funds, the predecessor Patricof funds (called Excelsior) and the Saunders Karp funds must consent to the transaction. The firms have selected March 1 as a target date for completion.

The two firms have a shared history through Megrue, who served as a vice president and principal at Patricof prior to joining Saunders Karp in 1992.

Saunders Karp’s Megrue, Karp and Christopher Reilly will sit on the six-member US operating committee of Apax Partners, along with Apax’s Paul Vais, Greg Case and Oren Zeev.

The letter stated that “fifteen of [Saunders Karp’s] experienced team of buyout professionals will join Apax Partners” in Apax’ New York and Silicon Valley offices.

In 2003, Saunders Karp reduced the size of its third fund to $734 million from $943 million, citing an increasingly au