Merrill Lynch clients lose out on Englefield

Investors lined up by Merrill Lynch’s fund placement group to invest in Englefield Capital’s debut fund were denied access after Englefield secured a E495m cornerstone investment from the Brenninkmeijer family.

(PrivateEquityCentral.net) Merrill Lynch’s private equity placement group has been forced to scramble for remuneration after a family group’s unexpected sponsorship of Englefield Capital’s debut fund, which closed earlier this month on E660m.

Merrill Lynch had worked for approximately seven months on raising capital for the London-based first-time fund, founded by former Warburg Pincus partner Dominic Shorthouse. According to sources familiar with the deal, it was trumped when Bregal, a Swiss-based vehicle controlled by the Brenninkmeijer family, became the main sponsor of the fund, closing Merrill Lynch’s prospective investors out of the vehicle – and Merrill out of the fees it could have earned on the placements.

Merrill Lynch had enough capital circled for a first closing of approximately E200m, these sources said. After Bregal became the sponsor, those potential investors were denied access to the fund while Merrill Lynch was forced to negotiate compensation for its seven-month effort, they added.

Englefield independently of the Merrill Lynch identified Bregal as a potential investor and decided to take it on as the sole investor. Merrill Lynch is confident it will receive some compensation for its efforts, the sources said.

Bregal is a subsidiary of Swiss-based family holding company Cofra Holding, which was established in 2001 to manage assets on behalf the Brenninkmeijer family, owners of retail chain C&A.

Englefield Capital focuses on European middle market companies in the outsourcing, renewable energy, and retail financial services industries. The firm will primarily focus on investments in the UK, France and Germany, although opportunities will be considered beyond those countries.

Englefield originally set out to raise approximately E450m. A source said Englefield made the right decision by taking on a sole sponsor because the fund closing was larger and quicker than would have been the case through a traditional fundraising process.

One placement agent said a placement agent being frozen out a fundraising process by a late-coming sole sponsor was a highly unusual situation and one he had never seen in his career.