Hicks Muse (Europe), the London-based European arm of Texan private equity manager Hicks, Muse, Tate & Furst, has announced a formal separation from its Dallas-based parent. The group confirmed today that it had become an independent private equity firm wholly owned by its partners. It also said that it would change its name in due course.
Lyndon Lea, who leads the London-based operation, said in an interview that the announcement marked the end of a process that had been ongoing since the summer of 2004.
Last July, Hicks Muse (Europe) announced that the firm’s compensation structure had been changed. Under the previous scheme, members of the US investment team were entitled to a share of the carry arising from European exits and vice versa. Under the new terms, the carry split was eliminated in favour of “eat-what-you-kill” provisions for both the US and the UK teams – a move which effectively sealed the separation of the London operation from the Dallas mother ship.
Lea emphasised today that neither from an operational point of view nor in terms of cost, much would change for the firm after today’s announcement, as it had already operated autonomously for some time. “It is nice to have 100 percent control over one’s destiny as opposed to just partial control, but that is an intangible [benefit],” Lea said.
John Muse, who set up the London operation for Hicks, Muse, Tate & Furst and remains in charge of the Dallas-based US business, will serve as non-executive chairman of Hicks Muse (Europe).
The separation comes after Hicks Muse (Europe)’s debut fund, a $1.5 billion structure raised in 1999, has been fully invested. The group is currently raising a follow-on fund, completion of which is expected later this year.
Investors in Hicks Muse (Europe) were advised of the split some time ago. In the press release, Lea said the firm had “received widespread support from our investors who expect us to continue to develop the strategy that we have implemented over the last seven years to generate attractive returns on their behalf.”
Hicks Muse (Europe)’s independence could set an example for other private equity teams operating in Europe as part of US-headquartered businesses. Some industry practitioners predict that in five years' time, the European private equity landscape might look substantially different from today, provided a number of other spin-outs from US partnerships occur.