After only six months of marketing, London-based private equity house Permira has closed Permira Europe III at E5.1bn, making it the largest buyout fund raised in Europe to date. The E5.1bn Permira Europe III fund puts the firm ahead of European rivals such as CVC European Equity Partners III (E4.7bn), The Third Cinven Fund (E4.4bn) and Apax Europe V (E4.4bn) in the fundraising stakes.
Charles Sherwood, a partner at Permira involved in the fundraising, said the firm had written a number of terms into the partnership agreement governing the fund that were intended to accommodate investors’ requirements for greater disclosure and transparency. “The position we’ve accepted, and which is reflected in our legal documentation, is that investors in the fund will have to reveal returns and performance in terms of cash flow, IRR and multiples,” said Sherwood. “Where we’ve drawn the line is disclosing the performance of underlying portfolio companies, which we feel would be damaging.”
Sherwood acknowledged Permira had ‘not been keen to reveal fund performance in the past’ and said its decision was a step change in an industry where ‘some private equity firms have chosen not to reveal anything at all’. The change reflects what Permira anticipates will be continuing pressure on its US investors for greater fund disclosure. Among those investors is CalPERS, which was last year forced to reveal the performance of its private equity investments following the threat of legal action.
The firm’s third European fund was raised in just six months and was heavily oversubscribed. While being capped, it easily surpasses the E3.5bn raised by the second fund, Permira Europe II.
Sherwood handed the credit for the firm’s fundraising success to the five-strong in-house investor relations team headed by Philip Bassett. “We don’t see fundraising as a secondary function that should be outsourced,” said Sherwood. “You would have to ask other large buyout groups why they use outsourcing but I can understand that smaller groups would find it hard to justify the fixed cost [of maintaining a dedicated fundraising function in-house].”
The fund achieved greater geographical diversification than its predecessor, with a doubling of investment from the Middle and Far East from six per cent of the total to 12 per cent. “We have made a push into the region as we see Japan in particular as the growth market of the future,” said Sherwood. Continental Europe also saw an increase from 18 per cent to 21 per cent, while the contribution from UK and North American sources fell from a combined 76 per cent to 67 per cent.
Sherwood was particularly pleased to have attracted 77 new investors to the fund out of a total of 134, outstripping the combined total of 69 new investors in the two previous funds. He said this was the result of an extensive marketing exercise involving 300 investor meetings that commenced 18 months before the launch of the fund. “Gone are the days when you only ever knocked on investors’ doors with a begging bowl when you needed to collect your commitment,” he commented.
A total contribution of E875m came from Schroder Venture International Investment Trust (SVIIT), a quoted fund manager, and its affiliated P123 vehicle that only invests in funds managed by Permira. Together, they accounted for 17.25 per cent of the total fund size.
Legal advisers to the fund were Fried, Frank, Harris, Shriver & Jacobson in Washington and SJ Berwin in London.
Permira Europe III will focus on the acquisition of European businesses, with equity commitments to individual companies in the range of E50m to E500m.