Duke Street is in the process of restructuring its Parisian office, Private Equity International has learned.
The mid-market firm, which has kept headcount roughly unchanged but found it difficult to generate deals since the financial crisis, is now said to be downsizing its French operations. In a possible sign that its near-term focus has started to shift towards the UK, the address of its Parisian office was taken off the website earlier this month.
Duke Street did not reply to comment before press time.
It is understood that the firm does not intend to fully stop deal origination in France – rather, the newly restructured team is to rely more heavily on the additional network and capabilities provided by Tikehau Group, the French GP that bought a 35 percent stake in the firm’s holding company in June. The firm’s remaining team will keep on managing the firm’s three existing portfolio companies in the country.
The news comes as Duke Street gears up to raise a new vehicle, after postponing its return to the fundraising trail last year. Citing a tough investment climate and difficulties at some of its portfolio companies, the firm has turned to a deal by deal approach since then, tapping investor appetite for more flexible structures to maintain the firm afloat.
But despite being able to seal deals – the first of which was LM Funeral, acquired in April 2012 – the firm soon understood the limits of the model, the source explained. They included the difficulty to compete in auction processes, thereby constraining the range of targets Duke Street was able to look at. This prompted Duke Street to accept the cash injection by Tikehau earlier this year, which the firm will use as a cornerstone to its new fund, Duke Street Opportunities I.
Expected to be launched this autumn, the vehicle will aim to deploy £500 million over the next three years, using capital committed by LPs to secure mandates before syndicating them to third party investors. It remains unclear what the fund’s eventual target in capital committed will be.
The GP is currently in the process of getting AIFMD regulated, a move designed to shelter its original structure from legal uncertainties as well as provide it with an edge in the French market, the source said. The Tikehau deal is also awaiting completion, likely to happen within the next couple of months.
The firm’s previous vehicle, which reached its final close on €963 million, is seven years old. Fashioned as a traditional blind pool fund, it is now fully invested.