Doughty restructuring paves way for €3bn fund

The conclusion of probate issues following the death of co-founder Nigel Doughty in February has paved the way for Doughty Hanson to restructure and begin raising its next fund.

London-headquartered Doughty Hanson has completed a restructuring, essentially forming a new firm which will be wholly-owned by an employee trust and original co-founder Richard Hanson.

The firm, in its new guise, is poised to begin fundraising for its sixth buyout fund in the next few months. The fund is understood to have a €3 billion target – the same as its 2007-vintage fifth fund. The firm declined to comment on fundraising plans.

SJ Berwin has been advising the firm on the formation of its new limited liability partnership structure, with merchant bank Richmond Park Partners also advising. Debevoise & Plimpton have historically worked with the firm on fund formation, and are understood to have been retained for the new fund.

The new structure will be the vehicle for future private equity funds, the firm said in a statement, and by Fund VII, participants in the employee trust will own the majority of the firm. At present, Richard Hanson owns a majority stake in the new vehicle, which will be reduced as employees buy into it in time for Fund VII to be raised.

The forthcoming Fund VI will be structured as a UK-registered limited liability partnership, regulated by the Financial Services Authority and tax-resident in the UK.

Chief executive Stephen Marquardt said: “While borne out of very sad circumstances, we believe that operating the new group structure and existing Doughty Hanson Funds in parallel provides the best way to ensure we deliver value for new and existing investors, while positioning the company to grow and evolve in the future.  We are certain, as well, that it will ensure we retain and incentivise the best talent to deliver returns for our investors.”

In addition to the probate issues arising from founder Nigel Doughty’s tragic death in February this year, the firm also wanted to conclude two exit processes before launching the next fundraising. The first of these, Fund IV portfolio company Tumi Holdings, delivered a 2x return following its successful IPO on the New York Stock Exchange in April.

The second, the sale of activated carbons business Norit to Cabot for $1.1 billion in June, delivered a 2.5x return. That exit alone returned 30 percent of Fund V’s capital to LPs – a timely realisation in light of the forthcoming fundraising.