Duke Street announces biggest European buyout fund yet

The fund, with an E1bn target, will make 10 to 15 investments of up to E300m, most of which as part of its buy-and-build strategy.

Duke Street Capital, the UK based private equity firm, has launched its biggest European buyout fund to date. The fund, Duke Street Capital V, has a target of E1bn.

The fund is aimed at buyouts of up to E300m and will make between 10 to 15 investments in private companies. Duke Street says it is “highly confident” that the fund will reach the E1bn mark and expects to close the fund in the summer.

“There are still a lot of private companies to go for, particularly in Europe,” said Sharon Corper, head of investor relations at Duke Street. “There are many family-owned companies facing problems of succession as well as corporate spin-offs.”

However, Corper does not discount quoted firms. “We do look at public-to-private deals, targeting companies that do not get coverage from the analysts and are frustrated because they do not feel their stock is sufficiently valued”, Corper said.

Such companies are even more attractive in a bear market. “If the market is suffering, these companies find it difficult to cut deals because they can’t do share placements,” said Corper. “So this kind of market is exciting because we see good companies at very good prices.”

According to Corper, Duke Street will continue its buy-and-build strategy. “Of the 26 investments we have done since 1994, 22 have had add-on acquisitions”, she said.

Duke Street has historically acquired companies that have ranked in fourth or fifth place in their respecive sector, and has subsequently built them up to turn them into market leaders.

Recent examples for this strategy are Focus-Wickes, the UK DIY retail business formed last year and Metaux Speciaux, Europe's leading manufacturer of sodium metal and its derivatives.

Duke Street aims to keep its market focus on business-to-business, media content, special chemicals, printing and packaging as well as leisure.

The firm will invest E50m of its own money in the new fund as it did in its last European buy-out fund, Duke Street IV, which closed at E650m in October 1999. About three quarters of its capital has so far been invested.

In addition to marketing to institutional investors, a feeder fund managed by SG Hambros Bank has been set up to enable private investors to put in money. To bolster its appeal to retail investors, the fund has been structured to incorporate taper relief. “We expect retail investors will contribute up to E20m,” said Corper.