The manager consolidation industry insiders have predicted has begun as Bridgepoint prepares to take control of two active funds and the related 10-person investment team from Hermes Private Equity.
“It was an opportunity to consolidate an already very good relationship with a key LP, and to go into the small buyout space – which is very active these days – with a team and funding,” a Bridgepoint spokesman said.
Hermes, which has committed to Bridgepoint’s last three buyout funds, conducted a strategic review of its own businesses that found direct private equity investing no longer a part of its core activities. It will increase its focus instead on its £1.7 billion fund of funds platform, led by Susan Flynn.
Late last year, Hermes approached Bridgepoint regarding assumption of its £250 million Fund II, of which about £200 million has been committed to 10 deals, and its £300 million Fund III, of which £56 million has been invested. Both funds count the BT Pension Scheme as their sole limited partner.
It was an opportunity to consolidate an already very good relationship with a key LP, and to go into the small buyout space – which is very active these days – with a team and funding.
Bridgepoint will also take on Hermes Private Equity’s 10-person team, which will manage the Hermes funds as well as scout deals below the €100 million mark. They will form Bridgepoint Development Capital, which will be led by Rod Selkirk, formerly chief executive of Hermes Private Equity. It marks a return to past roots for Selkirk, who worked for Bridgepoint from 1990 to 2002.
Small buyouts are outside the mandate of Bridgepoint’s existing funds, the most recent of which closed on €4.8 billion in October 2008. The firm’s two arms will share back office resources as well as sector expertise and market intelligence, where appropriate.
The Hermes deal is expected to close in coming months, pending standard regulatory approvals, and will take Bridgepoint’s assets under management to €9.8 billion.