Royal Bank of Scotland has completed an overhaul of its Royal Bank Private Equity operations which will see the division folded into what the bank calls the Equity Finance Group (EFG).
The restructuring comes after weeks of industry-wide speculation that changes at RBPE were imminent. Industry sources say concern had grown inside the bank over the performance of RBPE's investment portfolio.
The Financial Times reports that the bank’s new division will be headed by Rory Cullinan, who joined the bank in 2001 to establish the principal finance unit. Former RBPE chief executive Mark Nicholls becomes EFG vice chairman.
RBS has stated that the overhaul is an attempt to combine its private equity businesses rather than an attempt to retreat from the asset class. However, the move is also seen as a partial retreat following the large number of deals undertaken by RBPE in 2001. These included the £441m acquisition of Britax, the largest UK public-to-private deal completed in 2001, as well as deals to acquire engineering firm Doncaster’s and Cannon Health Clubs. RBPE also co-invested in the £1.9bn buyout of hotel chain Le Meridien.
In December 2000, RBPE relaunched itself after receiving a commitment from RBS of £1.5bn for 2001-2003. It subsequently built a new team, which included 20 new investment executives, to work across a range of private equity disciplines. In September 2001, the firm announced that it would accelerate its third party investment programme in order to make it less dependent on the balance sheet of RBS.
The new strategy makes RBPE the latest captive private equity operation to be revamped. Last year similar changes were implemented at UBS' private equity unit UBS Capital and Deutsche's Morgan Grenfell.
Part of the restructuring will see Tim Farazmand, one of the private equity industry's best-regarded deal makers, leave the bank after eight years. It is expected that Farazmand will leave his post within the next two months.