Goldman funds Morgan Grenfell asset sale

Goldman Sachs Private Equity Group is backing Vision Capital’s purchase of four portfolio companies from Morgan Grenfell Private Equity, Deutsche Bank’s UK buyout business.

Deutsche Bank-owned Morgan Grenfell Private Equity has sold four portfolio companies to Vision Capital in a deal backed by Goldman Sachs Private Equity Group, which is part of the bank’s asset management business.

Vision Capital is thought to be paying in the region of E100m for the assets, which include significant investments in three businesses, Deloro Stellite Group, Abrasive Technologies Holding and AB Cerbo Group, and a fourth, smaller investment in Shearings Group.

The interest in Deloro, a German manufacturer of wear-resistant components, was acquired by Morgan Grenfell as part of a DM219m (E100m) management buyout in 1997. Also included is a minority investment in Shearings, a coach-based tour operator acquired by Bridgepoint Capital for E133m in 1996. Abrasive Technologies, a Swiss manufacturer of abrasive precision grinding wheels, and Swedish Cerbo Group, a manufacturer of pharmaceuticals, food and industrial packaging, make up the quartet.

Goldman Sachs in investing in the transaction through its $1.1bn Vintage II fund, a private equity secondaries vehicle.

The transaction, described by Vision Capital in a statement as the first ‘synthetic secondary’ transaction in Europe, follows a similar strategy pursued by Goldman in the US. Last year, also investing via Vintage II, the bank acquired a portfolio of direct company investments from Wachovia, a commercial bank, alongside private equity manager Peachtree Equity Partners.

Synthetic secondary portfolio transactions can be distinguished from conventional secondaries where new investors typically acquire fractional interests in an existing fund and do not become directly involved with the underlying portfolio companies. Vision Capital will actively manage the portfolio. Synthetic secondaries are usually carried out for corporate venturing programmes and bank holdings.

“The deal provides these businesses with active management and new capital which had not been available from Morgan Grenfell’s closed fund,” said Alister Wormsley, a director at Vision Capital. “It is especially significant given the relative lack of liquidity in the European market.”

The sale to Vision Capital provides Morgan Grenfell with a complete exit from the four businesses, which received capital from four Morgan Grenfell Equity Partners funds.

Goldman Sachs will take a majority investment in the holding company, which will be managed by Vision Capital. Vision Capital also intends to bring in new investors to the business, but declined to comment on the identity of possible partners or the investment size. Vision Capital said that it intends to hold the four businesses for between three and five years, the standard timeframe for conventional private equity transactions.

Goldman Sachs was not available for comment.

London based Vision Capital was founded in 1997 by Julian Mash, formerly deputy head of European Investment Banking at Smith Barney. Since its inception, the firm has completed over 20 transaction and advisory assignments including 10 private equity and portfolio company transactions.