PEI has learned that, in what constitutes one of the UK's first hostile removals of a private equity management company, institutional investors have forced the general partner of a mid-market private equity fund to hand the running of its portfolio to a new manager.
Albemarle Private Equity, a London-based investor in the UK mid-market led by David Wills and Graham Barnes, has been removed as manager of a £44 million private equity fund that was organised in 1996.
According to people close to the situation, almost 90 percent of the limited partners in the fund, Albemarle's third, joined forces to replace the incumbent general partner with Nova Capital Management, a London-based acquirer of private equity and venture capital direct investment portfolios.
Sources familiar with the situation report that prior to moving to oust the original management team, the investors sought to reach agreement on terms under which Albemarle would resign.
The LP syndicate was led by Martin Currie. The Edinburgh-based asset manager is the largest investor in the Albemarle fund. Other LPs in the fund who are believed to have supported the removal of the general partner include Rover Pension Fund, Axa Equity Law and Insight Investment.
Newgate Partners, a specialist private equity advisory firm based in London, acted as advisor to the investor group.
Yet to be resolved is the issue of how much compensation the departed manager is owed at this point. Albemarle declined to comment beyond confirming that it has “issued proceedings in the High Court for the compensation to which it is entitled under the Limited Partnership Agreement.”
A Nova Capital spokesperson declined to comment.
Limited partners in private equity funds are increasingly concerned about managers that they believe are failing to deliver returns whilst continuing to charge fees for the management of mature but unrealised investment portfolios.
Once completed, the Albemarle case is likely to inspire other disgruntled investors in funds that they feel are under-performing to think about similar measures against the managers of these funds. The result could be a significant increase in involuntary consolidation activity in the asset class.
However, whether other investor groups keen to remove a manager of a limited partnership will come to the fore depends in part on how much confidence they have that they are legally in a position to effect change. This will in turn depend on the documentation that governs the partnerships in question. Fund formation experts describe Limited Partnership Agreements entered into in the 1990s as often written in terms favouring the general partner – not least in situations where limited partners may be seeking to force a change of manager.
ADVEQ CLOSES FOURTH TECHNOLOGY FUND OF FUNDS
Zurich-headquartered private equity fund of funds investor Adveq Management has closed its fourth technology fund, PETP IV, on $325 million (€268 million), ahead of its $300 million target. The fund will invest in venture capital limited partnerships that focus primarily on early stage, start-up technology companies. Around three quarters of the fund will be invested in venture and the remainder in buyout opportunities, primarily in the US. Adveq was founded in 1997 and advises on over 100 fund investments worldwide, with approximately $1.5 billion under management. 90 percent of Adveq's investor base is made up of institutions and the company employs a staff of 30.
ENTERPRISE CLOSES €300M CENTRAL EUROPEAN FUND
Polish-headquartered private equity firm Enterprise Investors has announced the final closing of its €300 million ($362 million) Polish Enterprise Fund V. The oversubscribed fund, which was launched in January 2004, will target investments in Poland and Central and Eastern Europe. The firm will primarily consider buyouts and provide expansion capital, with commitments ranging from €3 to €45 million per investment. The fund attracted commitments from new and returning limited partners including Alpinvest, Bank Austria Creditanstalt, CalPERS, European Bank for Reconstruction and Development, European Investment Fund and a number of other financial institutions from Europe and the US. Enterprise has approximately $1.1 billion (€0.9 billion) currently under management and has invested $750 million in 93 companies across Central and Eastern Europe since inception.
TRIANGLE IV HOLDS FIRST CLOSE ON €15M
Triangle Venture Capital, a German venture investor founded in 1997 by Uli Fricke, Bernd Geiger and Malte Köllner, has held a first closing of its fourth technology fund on €15 million ($18 million). Fund IV was launched in November 2003 and has a final target of €50 to €75 million. Investors in the first round of fundraising included European-based institutional and high net worth investors. The fund also attracted Triangle's first institutional investor from outside Germany. One-third of commitments came from new investors, with the remainder made up of returning investors. Triangle currently manages approximately €24 million through its first three funds and hopes to hold a final close of Fund IV later this year or early in 2005. Acanthus Advisers is acting as placement agent for the fund.
€50M IBERIA/FRANCE FUND LAUNCHED
Espirito Santo Capital, the private equity arm of Portugal's Banco Espirito Santo Group, and Sigefi Private Equity, the management company of Siparex Group of France, have launched SES Iberian Fund I (SES I). The fund aims to raise €50 million from Spanish, Portuguese, French and international investors. SES I will target investments in mid-market companies with revenues between €10 million and €100 million in Spain, France and Portgual. The fund will be advised by Madrid-based SES Iberia Private Equity and will be jointly owned by the two founding sponsors. The fund will comprise two parallel investment vehicles: Espirito Santo Iberia I, an FIQ vehicle registered in Portugal and managed by Espirito Santo Capital and Siparex Iberia I, an FCPR vehicle managed by Sigefi Private Equity and registered in France.
LEHMAN BROTHERS CLOSES €750M EUROPEAN MEZZ FUND
The private equity arm of Lehman Brothers, the global investment bank, has announced the final closing of its debut mezzanine fund dedicated to Europe on €750 million ($900 million). The Lehman Brothers European Mezzanine Fund 2003, led by Julian Entwistle and Christopher Cooke and backed by the bank with a €150 million commitment, exceeded its original €500 million target. The fund's primary focus will be on companies with enterprise values of more than €400 million and will invest exclusively in Europe. To date approximately €200 million has been invested in 12 companies, including a commitment to Halfords, the UK car and bicycle accessories chain.
Mezzanine funds remain popular with investors. Intermediate Capital Group, the listed UK-based provider of mezzanine finance, recently closed its latest fund on €668 million. Last September, Goldman Sachs, the global investment bank, closed the largest-ever global mezzanine fund on $2.7 billion.