BPE continues to mull spin-out

Barclays' private equity arm is continuing talks with its parent about a possible spin-out, though contrary to media reports, sources say investors in Barclays Private Equity funds have as yet not been involved.

Barclays Private Equity continues to discuss a potential spin-out from its parent company, UK-headquartered bank Barclays Group, although details of its proposed move to independence have yet to be finalised or discussed with limited partners.

Contrary to earlier media reports, limited partners in the buyout firm’s latest fund contacted by PEO have yet to be formally included in discussions about a proposed spin-out, although one source said it would not be “rocket science” to assume most LPs would favour the move. Captive groups within investment banks are often frowned upon by LPs, said another source, because in addition to being affected by any problems encountered by the parent, they may be more prone to potential key-man and compensation issues.

Barclays declined to comment.

PEO reported in December that the mid-market unit had again raised the possibility of a spin-out with investors, though a source familiar with the talks said there was no specific plan or timeline in place.

Investors in BPE’s latest £2.4 billion (€2.6 billion; $3.6 billion) fund include funds of funds Allianz Private Equity Partners, shaPE Capital and SL Capital Partners as well as US endowment University of Texas Investment Management Company and the UK-based West Yorkshire Pension Fund.

Should the firm eventually become independent of Barclays, it would be among a host of former in-house groups to spin out. The most recent example in the UK is CBPE Capital, which recently separated from European investment banking group Close Brothers.

Other firms to have spun out of banks include AAC Capital, the former captive of Dutch group ABN AMRO; Montagu Private Equity, originally part of HSBC; Metalmark Capital, formerly a Morgan Stanley division; ex-JPMorgan captives CCMP Capital Advisors and Unitas Capital, formerly known as CCMP Capital Asia; and former Deutsche Bank groups MidOcean Partners and DB Capital Partners, now called Propel Investments.