At the moment, the investment banking side of the placement business is down to just a handful of players. Erstwhile participants Deutsche Bank and JP Morgan recently quit the market, leaving a core group of institutions: some notable old hands alongside some newer and ambitious arrivals.
Credit Suisse First Boston's globally operating Private Fund Group still has the largest team (over 60 professionals) and probably the most respected franchise. In 2002, the firm claimed a market share of over 25 percent of all private equity capital placed that year. Key personnel recently signed new employment contracts with the bank, ending a period of uncertainty over whether or not they were to go independent. Shortly afterwards the group was made part of CSFB's newly established Alternative Capital Division. Following these changes, few practitioners doubt that it can hold on to its current status as the only global superpower in private equity fund placement going forward.
CSFB's great rival Merrill Lynch, who lost most of its sales team to new entrant Lazard in February 2003, is still in the process of regaining lost ground, although sources close to the firm say things are progressing well. The group, which is run by placement veteran Kevin Albert, currently has 22 professionals in New York, London, San Francisco and Tokyo. Recently completed fundraisings include Silver Lake Partners, which at the time of writing was preparing a formal close of its second fund on $3.5 billion, Terra Firma Capital Partners (placed together with Citigroup), Castle Harlan and Intermediate Capital Group. Several other clients are currently in the market with Merrills as well.
Another significant bank-owned placement operation is UBS Private Equity Funds Group. UBS has a global team that now that comprises 28 professionals and which last year moved its senior management from London to Stanford in the US, where it most recently completed fundraising projects with Gores Capital Partners, Swander Pace Capital and Monitor Clipper Partners. The firm is clearly keen to win US mandates whilst leveraging its global sales channels.
Finally there is Citigroup, whose placement operation is part of the bank's Financial Entrepreneurs Group dedicated to private equity. Citi's fundraising team, now jointly led by Patrick Dunleavy and Douglas Blagdon, is currently in the market with mandates including Hicks Muse Tate & Furst's €1 billion second European fund and a $500 million Asian offering from New York-based distressed specialist Avenue Capital.
Following Citi's parting of ways with chief fundraiser Loren Boston late last year and a number of other more junior departures before that, there has been some market speculation whether the bank might be thinking of withdrawing from this part of the private equity universe altogether. Word is though that some of the asset class's biggest supporters within the bank are keen to see this part of the operation flourish. Most observers therefore now expect the group to scale back up again. Citi's pockets are of course deep enough to fund an expansion at pretty much any level and, as one placement practitioner puts it, “there is certainly room for another large captive, especially now that the market is getting busy again.”
Meanwhile Lazard, which in February made private equity headlines with plans to establish a European buyout operation, has made progress with the fundraising practice it set up fourteen months ago. The team, managed by Ben Sullivan and Bill Riddle, is understood to be working on a number of projects and recently helped close a $250 million life science and medical technology fund for De Novo, a venture group based in Menlo Park, California. Unsurprisingly other agents and fundraising firms have been keeping a close eye on this group's activities, recognising that the bank – especially under the guidance of Bruce Wasserstein – will be intent on making its brand work hard.
Other financial institutions currently looking to break into fund placement include Deloitte & Touche, whose London-based corporate finance specialists under the guidance of Chris Ward are in the process of building a fund placement business with the help of James Coleman (formerly of UBS' placement group), and Cazenove, the independent UK brokerage and investment bank, which in March recruited Alex Bance, also from the London fund placement team of UBS.
As ever, these captive groups are competing for bestselling mandates not only with each other, but also with a still growing number of independent placement boutiques as well as the numerous individuals who are operating on their own.
Intriguingly, one of the leading international boutiques, Atlantic-Pacific Capital, is currently believed to be for sale. Perhaps another large financial group will buy itself into the private equity fund placement industry before long.