MONTAGU PRIVATE EQUITY

SNAPSHOT:
London-based Montagu Private Equity focuses on MBOs of established European companies and is more concerned with acquiring companies with growth potential and an incumbent management team that are worth backing than it is with sticking rigidly to a single sector or price range. Its last two funds have both been capped at around £1.2 billion (€1.7 billion; $2.3 billion) – a figure the firm is hoping to repeat with its next fund, to be launched next year.

Montagu was established in 1968 as the UK-based Midland Bank's Industrial Finance subsidiary. Midland was acquired by HSBC in 1992, and four years later its private equity arm was renamed HSBC Private Equity to reflect its status as a division of the growing multinational. But by 2003 it was felt that independence would help prevent conflicts of interest from arising, and in March of that year the management team, led by chief executive Chris Masterson, bought out an 80 percent stake in the company for an undisclosed sum. HSBC still retains a minority stake in the company and agreed to commit half of the capital Montagu raised for future funds.

2004 has been a busy year for the firm. In February, it enjoyed a liquidity event with the flotation of Dignity Funeral Services on the London Stock Exchange for £184 million, giving it a return of three times its original investment.

This was followed by significant new investment during the summer. July saw the announcement of two acquisitions in Germany, ending the firm's three year absence from the country's buyout market. On July 5th, it announced its acquisition of German manufacturer Stabilus from Demag Holding for an undisclosed sum, rumoured to be around €500 million. Only a week later, it announced that it had acquired sausage-casing maker Kalle Holding in a secondary buyout from CVC Capital Partners for €200 million.

Three acquisitions elsewhere in Europe followed before the quarter's end. At the end of July, Montagu arranged the management buyouts of French horse racing newspaper publishers Editions en Direct for an undisclosed sum. In August, it bought survival technology company Survitec from Alchemy Partners for £146 million. The following month, it bought UK-based Maplin Electronics for £244 million in a secondary buyout from Graphite.

The firm is currently raising its third £1.2 billion fund, and is planning to continue its current investment strategy. Judging by the firm's track record, another suitable motto would be: “If it ain't broke, don't fix it.”

KEY EXECUTIVES:

Chris Masterson Chief Executive Officer
Phil Goodwin Head of UK Investments
Nigel Hammond Head of European Investments
David Farley Head of Manufacturing
Vince O'Brien Director, Head of Investor Relations
Mark Dunfoy Director, Portfolio and Risk
Graham Hislop Finance Director

LIMITED PARTNERS INCLUDE:
New York Life Investment Management, LLC

Shell Pensions (UK)

Morley Fund Management

Verizon Pensions Fund (US)

FUND FAMILIES

Name Vintage Size
Montagu Private Equity Partnership Scheme 1994 £1.2bn
(Montagu I)
Montagu European Private Equity Fund II 2002 £1.2bn
Montagu European Private Equity Fund III Planned 2005 £1.2bn target