Private equity capital is supposed to be patient capital, even though the industry's detractors often accuse it of short-termism. One piece of evidence that buyout funds really are prepared to back businesses for many years came in July, when Deutsche Beteiligungs, the German mid-market group, floated Homag, a manufacturer of woodworking machinery.
Deutsche Beteiligungs invested in Homag in 1997 and first tried to take it public in 2001. The timing could not have been worse, however: the tech bubble burst, the IPO market shut and Homag found itself back at the drawing board. Six years passed until the company and its private equity partners decided to dust off their pitch books and have another go. This time things went swimmingly.
Homag raised €214 million in a deal valuing the business at €486 million. Funds advised by Deutsche Beteiligungs pocketed €120 million of the proceeds and retained approximately 30 percent in the company. €35 million went to Homag to help finance expansion plans.
Another €57 million went to private investors in the business including Gerhard Schuler, the entrepreneur who founded Homag and earlier this year stepped down from the company's advisory board. Schuler's family received €39 million from the deal.
As far as liquidity events go, Schuler showed even more patience than its private equity partners before taking money off the table. The entrepreneur is 80 years old and founded the business in 1960. After 47 years, Schuler's IRR on the original investment might not look great, but that will hardly bother him. He still has a significant equity interest in the company and can also bask in the glory of being one of the very few octogenarians in the world to have seen their company go public.
Prior to the IPO, funds affiliated with Deutsche Beteiligungs controlled approximately 60 percent of Homag's equity. Shares were placed at €31 a piece. At press time, the stock traded slightly above the issue price.
JPMorgan and Dresdner Kleinwort advised on the flotation. When trading started on July 13, Schuler was there on the trading floor of the Frankfurt bourse to ring the bell.
BVCA BEGINS SEARCH FOR NEW CHIEF EXECUTIVE
The British Private Equity and Venture Capital Association (BVCA) has hired headhunter Odgers Ray & Berndtson to find a replacement for Peter Linthwaite, who resigned from the organisation in June. The BVCA has established a search committee comprising chairman Wol Kolade, vice chairman Jeremy Hand of Lyceum Capital, Simon Havers of Baird Capital Partners Europe and Jo Taylor of 3i. The BVCA has been thrust into the spotlight in recent months as the private equity industry has been condemned by trade unions and leftleaning politicians as asset-stripping and profiteering. The BVCA hosted the first of two roundtable talks with the Trade Union Congress (TUC) in July as it seeks to placate its fiercest critic.
ALPINVEST APPOINTS TWO PARTNERS
AlpInvest Partners, Europe's biggest private equity investor, has recruited Elliot Royce as a partner in its fund investment team in New York and promoted Wouter Moerel to partner in its secondary investment team in Amsterdam. Royce was previously at Alliance Private Equity Partners, where he was managing director of US fund investments and head of the firm's New York office. Before that, he worked at GE Equity, the private equity business of General Electric. Moerel has been at AlpInvest since 2005. He was formerly a principal at The Carlyle Group and a vice president at both JP Morgan Chase and Lehman Brothers. AlpInvest is the vehicle formed to manage the alternative investments of ABP and PGGM, two large Dutch pension funds. It is soon to open a London office to add to its existing offices in Amsterdam, New York and Hong Kong.
CREDIT SUISSE EXPANDS FUND OF FUNDS TEAM
Credit Suisse has appointed Arnaud Lipkowicz as a partner in its private equity fund of funds team in London. Lipkowicz was formerly a director of investments at LCF Rothschild Group where he co-founded and developed a European third-party private equity business. Before that, he was a senior associate at the AXA-AIG private equity funds of funds business in New York. At Credit Suisse, he will focus on the bank's European activities.
GLSV APPOINTS MANAGING DIRECTOR
Swiss venture capital firm Global Life Sciences Ventures (GLSV) has promoted Stephen McCormack to managing director in its Zug, Switzerland office. McCormack has been at GLSV since May 2006 and became a partner in November 2006. He was previously a cofounder and CEO of two US-based biotech companies. GLSV manages more than €200 million and invests in companies in the pharma, diagnostics, medical devices and biotech sectors. The firm was founded in 1996 and has offices in Zug and Munich.
DEBEVOISE APPOINTS PARTNER IN LONDON
Law firm Debevoise & Plimpton has hired Anthony McWhirter as a partner in its investment management practice in London. McWhirter was previously a partner at rival law firm Freshfields Bruckhaus Deringer, where he founded the firm's investment funds practice. McWhirter advises investment managers and other financial institutions on a broad range of multi-jurisdictional private equity funds, including taxdriven fund structures and listed funds. Debevoise's private equity funds practice is one of the world's biggest. Since 1995, the firm has advised sponsors of, or investors in, more than 850 private equity funds with total committed capital of more than $720 billion. Founded in 1931, Debevoise has offices in New York, Washington DC, London, Paris, Frankfurt, Moscow, Hong Kong and Shanghai.
3I HIRES IN POLAND
3i has recruited Andrzej Szostak from Rothschild Polska to lead its deal activity in Poland. Szostak will be based in Warsaw but will spend some time at 3i's headquarters in London. The former investment banker will be responsible for sourcing and executing buyout deals in Poland and elsewhere in the region. He previously specialised in the TMT and energy sectors but will now focus on a range of sectors. 3i is looking to ramp up its investment in the Central and Eastern Europe region, with as much as 10 percent of the firm's €5 billion Eurofund V potentially available for this purpose. Szostak's hire follows that of Zoltan Toth, who recently joined from Advent International to lead the firm's activities in Hungary.