Capital Dynamics, the Zug, Switzerland-based private equity fund investor, has agreed to acquire Westport Private Equity, the UK fund of funds, from Man Group. A statement detailing the purchase was published today.
The acquisition, awaiting regulatory approval and due to close in April, will create a private equity-focused asset manager with $5.25 billion of capital under management, assuming all existing clients stay with the merged entity. Financial terms of the transaction were not disclosed.
Thomas Kubr, founder and chief executive of Capital Dynamics, said in an interview that in terms of institutional relationships, investment style and corporate culture, the combination of the two businesses was a “near perfect fit, which became obvious to all parties early on in the process”.
The news comes after Man Group, one of the world’s largest managers of hedge fund, said in January that it would it reduce its interest in Westport. Man had invested in Westport in December 2002 with a view to moving into private equity.
However, rapid growth at Man’s core hedge funds business, where the group now looks after $42 billion of capital, meant that private equity has been unable to make a meaningful contribution to its performance: Westport, commented a source familiar with Man’s strategic planning, was “increasingly like a flea on the back of an elephant”.
Man originally purchased a 67 percent interest in Westport but has since bought out minority shareholders including UK private equity group Parallel Ventures and Westport founder John McCrory to acquire 100 percent of the company in preparation for its disposal.
Upon completion of the sale to Capital Dynamics, Man will initially retain just under 30 percent of Westport’s equity. Timing and price of a transfer of the remaining shares to Capital Dynamics have already been agreed. It is expected that within two years after closing the acquisition, Capital Dynamics will own 100 percent of Westport.
In the meantime, Man Group will not have any strategic or operational involvement in the business, nor will it be represented on the company’s board.
Following the integration of Westport’s Birmingham-based operation, Capital Dynamics will have discretion over partnership interests in over 250 international buyout, venture and mezzanine funds. The group’s headcount, which currently stands at 20, will increase to 35. More than 40 institutions will make up the group’s client base.
Westport, whose brand will not be retained, will bring to the table a team of 15 UK professionals, £1.3 billion ($2.45 billion) of assets under management and a list of UK and European clients including the Bank of England, the European Investment Fund, Greater Manchester Pension Fund, Merseyside Pension Fund and Caisse de Depot.
Capital Dynamics, founded in 1999 and operating out of offices in Zug and New York, currently has $2.8 billion of assets and a roster of clients primarily in German-speaking markets and the US.
Commenting on the significance of the deal for Capital Dynamics, Kubr said the integration of Westport’s existing institutional franchise in the UK was a major step forward in the firm’s development as a globally positioned private equity asset manager.
Kubr added that Capital Dynamics would be able to offer existing and new clients a full range of investment solutions tailored to each client’s specific needs; as the private equity asset