Private equity manager Baring Private Equity Partners (BPEP) is to launch a management buyout from parent group ING, as part of a plan revealed exclusively on Privateequityonline.com last week.
BPEP and ING insist that the agreement they have reached will result in a management buyout of the whole of BPEP “with the participation and full support of each of the senior partners of the firm”. There had been speculation about a possible break-up of the firm whereby some of the teams that currently manage regionally focused funds for BPEP would seek independence from the group.
BPEP has 17 offices around the world and is divided up into six principal investment regions: Latin America, Western Europe, Central and Eastern Europe, India, Asia and Russia. It supports companies at all stages of development but focuses particularly on growth capital for mid-market companies.
Asked whether any of the regional funds may go their own way rather than participate in the buyout, a spokesperson said: “No. This is all about alignment of interests with our investors. It has been received positively and is seen as the next logical step for the business.”
Under the terms of the agreement, ING will not participate in any new fundraisings conducted by BPEP. But ING will retain its existing $360m of investments in BPEP funds, representing 18 per cent of BPEP’s total assets under management of $2bn.
The deal, which is expected to complete by the end of the year, follows a trend of financial institutions seeking to reduce their exposure to private equity. Said Alexander Rinnooy Kan, executive board member at ING Group: “While we still regard private equity as an attractive asset class, this agreement is in line with ING’s strategy to focus on our core businesses.”
Private equity has become less attractive to banks as a result of the capital adequacy rules stemming from the Basle II proposals. At present banks need 8 per cent in reserve for their private equity investments, but new rules state they will require a 24 per cent provision. This is expected to have a profound impact on banks’ capital requirements and their appetite for tying up capital in private equity.