In December, our sister site PrivateEquityOnline.com reported that two managing directors at Pacific Corporate Group (PCG), Tom Keck and David Scopelliti, had left the firm. According to sources close to the PCG, the departure had to do with a dispute between these two and Pacific Corporate founder Christopher Bower over ownership and governance issues at the firm. Intriguingly, just three months earlier, Keck stood in front of the State Investment Commission of Rhode Island to explain a “new structure” for the state pension's private equity advisor, PCG. According to minutes released by Rhode Island, on September 27, 2006, a meeting including members of the commission and PCG team members Keck, Bower, Kara King and Mark Oemcke was convened in part to discuss the earlier resignations of four other PCG managing directors, including Monte Brem, the president of the firm's asset management arm.
According to the minutes, Bower described the departures as “unfortunate” but noted PCG's deep bench and strong performance as an advisor. The notes read: “The four departing individuals had approached Mr. Bower to renegotiate their contracts and also wanted some changes in governance and operations. Those changes were taken under consideration and agreed to and PCG researched comparable compensation packages. After further negotiations, the compensation issues were unable to be resolved.”
Then Keck gave what is described as highlights of PCG's new structure. The “old structure” of PCG was 70 percent owned by PCG Holdings (an entity 100 percent owned by Bower), with “senior employees having a contingent 30 percent interest”. The minutes continue: “Under the new structure, PCG Holdings owns 50 percent with the PCG asset management team having 50 percent ownership rights” to vest over five years.
Following the departure of Keck, a PCG spokesperson said Bower continues to own 100 percent of the firm, but is exploring compensation structures. Some PCG clients are not impressed. The Washington state pension has replaced PCG with rival consultant Capital Dynamics. Two clients, the Oregon Investment Board and the Teachers' Retirement System of the State of Illinois, have issued RFPs for a new consultant. In a statement issued last month, Stan Rubnick, the chief investment officer for the Illinois pension, said: “TRS is clearly disappointed in the recent events at PCG and the departure of our lead consultant at the firm.”
2006 FUNDRAISING SMASHES RECORDS
Provisional figures show that a total of 612 new funds held a final close during 2006, raising a record total of $401 billion (€309 billion) in new commitments, smashing last year's record total of $311 billion. The figure is likely to increase even further as data continues to come in, according to Private Equity Intelligence's 2007 Global Fundraising Review. US-focused funds continued to dominate the market, taking 63 percent of the global share in terms of new commitments. Europe also continues to attract strong investor interest, with 27 percent of all capital raised in 2006 committed to funds focusing on this region. Asian and rest of the world funds also grew in prominence, raising five percent more than during 2005. In total, 311 USfocused funds raised an aggregate $252 billion, while 168 Europefocused funds raised an aggregate $108 billion.
MONOMOY CLOSES DEBUT FUND
Monomoy Capital Partners, a spinout from New York-based KPS Special Solutions, closed its $280 million (€216 million) debut fund, Monomoy Capital Partners, in January. The fund exceeded its target of $200 million. Limited partners include: Bear Stearns Asset Management; Horizon 21 (formerly Swiss Re); Oppenheimer; and St. Paul Travelers. Approximately 30 percent of commitments came from European and other international institutions.
CITIGROUP REACHES $3.3BN
Citigroup Private Equity has closed Citigroup Capital Partners II, a $3.3 billion (€2.5 billion) fund. The fund will invest directly in private equity deals in partnership with buyout shops. The firm, which exceeded its target of $2.5 billion, included a $1 billion commitment from the Citigroup balance sheet as well as contributions from clients and employees.
DIAMOND CASTLE CLOSES DEBUT FUND
New York-based DLJ Merchant Banking spinout Diamond Castle Holdings has closed its debut fund, Diamond Castle Partners IV, on $1.8 billion (€1.4 billion). “We are extremely gratified by the investor support we have received, with over 75 percent of the capital coming from prior investor relationships,” Lawrence Schloss, Diamond Castle's chairman and chief executive officer, said in a statement. The firm plans to invest in leveraged buyouts and recapitalizations of companies valued between $200 million and $1.5 billion. It will target the energy and power, financial services, media and communications and healthcare industries, primarily in North America. Prior to the close, the firm had already committed $670 million, approximately 40 percent of the capital, to six investments.
TSG WRAPS UP FIFTH VEHICLE ON $875M
TSG Consumer Partners, a San Francisco- and New Yorkbased private equity firm that invests in branded consumer companies, has closed its fifth fund. Known as TSG5, the fund is valued at $875 million (€675 million). The fund's limited partners include the State of Michigan, the New York State Teachers' Retirement System and the State of Colorado, among others. TSG plans to use the new fund for investments in the consumer brand sector, a strategy it has employed since the firm's inception by J. Gary Shansby and chief executive Charles Esserman in 1987. TSG's previous fund, TSG4, closed in September 2002 on $500 million and made investments in the likes of Smart Balance Foods, PureOlogoy haircare, and Glacéau mineral water.
QUANTUM IN QUICKFIRE FUNDRAISING DOUBLE
Houston, Texas-based private equity firm Quantum Energy Partners has closed its fourth fund, Quantum Energy Partners IV, on $1.32 billion (€1 billion). This swiftly followed the closing of Quantum Resources, a $1.2 billion fund focused on acquiring oil and gas properties that Quantum raised in conjunction with Denver, Colorado-based exploration and production firm Aspect Energy in October 2006. “Quantum Energy Partners will primarily target investments in the oil and gas sector, while also considering opportunities in the midstream, oil field service, coal, power and alternative energy sectors,” the firm said of the new fund. Champlain Advisors acted as placement agent.