BofA to spin off $5bn Merrill PE group

BAML Capital Partners, which has been overseen by James Forbes, will become an independent firm and eventually raise third-party capital. Forbes will stay with BofA.

Bank of America Merrill Lynch is continuing its massive divestment of private equity, announcing this week that it intends to spin off BAML Capital Partners, which manages about $5 billion in assets. Earlier this week a group of secondaries funds spun out the bank's Asian private equity unit.

BAML Capital Partners, which Bank of America inherited when it acquired Merrill Lynch in an emergency deal in 2008, will become independent and change its name, though no details about changes were available as of press time.

The group will manage existing investments and raise third-party capital. Bank of America will own the investments in the BAML portfolio, a bank spokesperson said. Those investments include hospital operator HCA, which filed the largest-ever private equity-backed initial public offering in March. 

The BAML group has been headed by James Forbes, who was picked in 2009 to head up the combined banks’ global principal investment business that housed the private equity and real estate arms.  Forbes will stay with Bank of America, the spokesperson said.

Private equity investments were not strategically critical going forward.

BofA spokesperson

BAML Capital Partners did not have any limited partners, using capital solely from Merrill Lynch’s balance sheet. Since the merger, the group had been using capital from Bank of America’s balance sheet. The group did have co-investors making up about 5 percent of the $5 billion in assets the team manages. Those co-investors retain stakes in some BAML investments.

The bank has been exiting from private equity since the merger. Bank of America determined “private equity investments were not strategically critical going forward”, the spokesperson said.

Last year, Bank of America spun off its own private equity division, Banc of America Capital Investors, into an independent firm called Ridgemont Equity Partners. Ridgemont manages $1.5 billion of the bank’s legacy private equity assets and plans to raise third-party capital.

The bank also sold a private equity portfolio valued at about $1.9 billion to AXA Private Equity last year. The funds included in the sale were 2005, 2006 and 2007 vintages that Bank of America had invested in from its balance sheet. About 90 percent of the funds were US-based, with the balance being from Europe.

In 2009, Bank of America decided to shutter Merrill Lynch’s private equity fundraising platform, keeping on a small

James
Forbes

team to manage the business’ existing clients. Merrill Lynch’s private placement team, one of the oldest in the business, had raised funds like Silver Lake’s $9.3 billion third fund and Avista Capital’s $2 billion debut fund. That team eventually spun-off to become Mercury Capital Advisors.

More recently, secondaries firms Paul Capital, HarbourVest Partners, LGT Capital Partners and Axiom Asia financed the spin-out of Bank of America Merrill Lynch Asia, the four-year-old captive group that had invested from Merrill’s balance sheet.

The secondaries firms helped establish the spin-out, NewQuest Capital Partner’s, first fund, a $400 million vehicle seeded with the entire non-real estate private equity portfolio of the bank’s Asian investments, comprising more than 20 growth and buyout assets in China and India.