A storm is coming. Best perhaps to steer the ship into a safe harbour.
We don't know whether safety was on Wilbur Ross' mind when he agreed to sell his $3.5 billion private equity investment business to AMVESCAP, the ([A-z]+)-based asset manager listed on the London Stock Exchange.
His own financial comfort can't have been his concern, even though the deal with AMVESCAP looks lucrative. The group, which already owns private equity fund investor Invesco Capital, agreed to pay $100 million for the firm upfront, as well as five annual earn-out cash payments, each capped at $55 million. The first payment is guaranteed at $30 million.
Ross was of course a wealthy man even before he agreed these terms. Once dubbed “the king of bankruptcy” by Fortune magazine, the New York-based dealmaker is one of private equity's most highly regarded investors in turnaround situations.
As far as AMVESCAP is concerned, bringing Ross into the fold looks a smart move. His restructuring skills are likely to be needed soon if the private equity market hits the downturn that many are predicting.
In a recent interview with Private Equity International, Ross said: “There are more and more leveraged transactions in the marketplace, and there is an inevitability that a percentage of them will go bad. The warning signs are that leveraged lending is just about at its all-time record multiple of cash flow, and the high yield market is extremely strong and relatively indifferent about quality.”
Ross is not the only one convinced that something is about to give. His deal with AMVESCAP is certainly well-timed. Distressed investment is a highly cyclical business, and if you are the proprietor of a turnaround fund looking for an exit, now is very much the time to act. And with the five-year earn-out in place, AMVESCAP stands to get value for money out of the deal, too.
Ross believes other private equity firms will follow his lead. “Clearly one is moving toward the direction of institutionalising private equity”, he said in a conference call to announce the AMVESCAP agreement. “There will be some of the big firms perhaps doing IPOs, and other firms doing transactions of this sort.”
INVESTORS CLAMOUR FOR APOLLO FUND LISTING
Apollo Management has overcome investor scepticism to raise $2 billion (€1.6 billion), a third more than expected, for AP Alternative Assets, which listed on the Euronext Amsterdam exchange on 8 August, with 100 million shares offered at $20. The share price dipped to $19.80 reflecting the listing costs, but bounced back to $19.95 by the end of the week. This meant a further 4.95 million shares could be admitted to give the vehicle a market capitalisation of $2.1bn, before an 11 million share over-allotment facility can be used.
3I ROMPS TO FIRST CLOSE OF €4.3BN
3i, Europe's largest quoted private equity and venture capital company, has held a first closing of its latest buyout fund, Eurofund V, on €4.3 billion ($5.5 billion).
The amount committed to date is well beyond the initial intended target of €3.5bn. The fund's final close is due in the autumn and is capped at €5bn. About 50 investors committed to the first close, with a number of new investors from the US and the Gulf. More than 80 percent of investors in the previous fund returned to commit more money to the new venture.
ALPINVEST SPINOUT ABANDONS FUNDRAISING
The €30 billion fund investment giant AlpInvest has put spinout Taros Capital's future into question by withdrawing its cornerstone investment and effectively forcing Taros to abandon its plans for a €350 million fund. One source familiar with the fundraising said AlpInvest had decided to pull out because Taros had struggled to attract external investors for the Benelux- and Germany-focused mid-market buyout fund since the firm won its independence at the start of the year. Taros retains the mandate to manage the investments made while the team was part of AlpInvest. However, what will happen once those investments are sold is uncertain.
VCM GOLDING MEZZANINE II RAISES €238M
VCM Golding Mezzanine II, the second fund of funds managed by Munich-based fund managers VCM and Golding Capital Partners, has closed on €238 million ($300 million). Fund II will follow its predecessor's strategy of investing 50:50 between European and US mezzanine funds. As fund I is only just over 50 percent invested in 20 funds, both funds will invest in certain transactions. Jeremy Golding, founder of Golding Capital Partners, said that fund II was conceived as an extension of the first fund. “The overlap between the two funds means we have firepower of almost half a billion, which puts us in the unique position of having one of the largest war chests for mezzanine investment in Europe.”
GERMANY'S SHS LAUNCHES €70M VENTURE FUND
SHS Gesellschaftfür Beteiligungsmanagement, a German venture capital firm, has launched a new fund with a target of €70 million ($90 million). A first close is expected before the end of the year of approximately €40 million. A hard cap of €70 million has been targeted for Summer 2007. Fonds III will invest in earlystage companies in the healthcare and life sciences sectors in the Germanspeaking region, with a particular focus on medical technology and diagnostics.
STRATHDON LAUNCHES VC SECONDARIES FUND
Strathdon Investments, a UK technology investment company, has launched Strathdon Secondaries, a new fund to invest in venture capital secondaries. The initial size of the fund will be £6 million with the ability to increase the commitment up to £20 million. The first transaction completed by Strathdon Secondaries is the acquisition of 3i's interest in Pancredit, an established supplier of consumer finance software and lending systems. The fund has also acquired Strathdon's interest in the Esprit Capital 1 Fund, formerly the Cazenove New Europe Access Fund, for cash at a net asset value of £1 million.
F&C TRUST INCREASES PRIVATE EQUITY EXPOSURE
Foreign & Colonial Investment Trust, a UK growth investment trust, will expand its exposure to private equity with an annual target of £75 million (€110 million) per year. Foreign & Colonial Investment Trust will increase its allocation to private equity, originally targeted to be approximately 5 percent of the trust's total assets by 2008. The trust is now targeting an annual commitment of £75 million to private equity in order to reach a minimum allocation of 10 percent between 2009 and 2013.
LODH HOLDS €296M FIRST CLOSE
LODH Private Equity, the private equity arm of Geneva-based private bank Lombard Odier Darier Hentsch, has held a first closing of its third fund of funds, Euro Choice III, with €296 million ($373 million) in commitments. The fund has a target of €350 million and is expected to hold a final close in the third quarter of 2006. Euro Choice III, like its predecessors, invests in European mid-market buyout and growth capital funds as well as making select direct investments, with typical enterprise values of investee companies ranging from €50 million to €400 million.
TATE & LYLE BACKS VENTURE FUND
Tate & Lyle, a UK sugar producer, has bucked the trend away from corporate venture funds and committed a $45 million (€35.6 million) cornerstone investment to found Tate & Lyle Ventures, an independent firm. Simon Barnes and David Atkinson, managing partners, will head the partnership, which is targeting start-ups and expansion stage companies that reflect Tate & Lyle's drive for strategic growth. This is expected to come from nextgeneration food ingredients, as well as innovations in industrial ingredients, biomaterials and bio-fuels.
GI PARTNERS CLOSES FUND II ON $1.45BN
GI Partners has held a final closing of its second private equity fund at $1.45 billion (€1.14 billion). The firm launched the fund last September with a first close of $800 million. Investors in Fund I I include CalPERS, CalSTERS, The University of Oregon, ATP and Abu Dhabi Investment Authority. Lazard was the placement agent for the fundraising. Although significantly larger than its $526 million predecessor, GI Partners Fund II will follow Fund I's strategy of investing between $50 million and $250 million of equity per transaction in US and Western Europe companies in sectors including leisure, retail, financial services and logistics.