The UK industry's last-ditch attempt at self regulation, Sir David Walker's report on disclosure and transparency in private equity, has led UK industry body the British Private Equity and Venture Capital Association (BVCA) to appoint a monitoring group to check compliance with the proposals.
The chairman of this body, Sir Michael Rake, would, alongside the council of the BVCA, expel members which do not comply with the proposals and do not undertake early remedial action.
Simon Walker, the BVCA's chief executive, told Private Equity International: “It is going to be a real burden and I don't want to underrate that.” But he did not believe it would lead to an exodus to more favourable jurisdictions.
The report recommends the BVCA introduce into its organisation a “private equity-like” category to include private businesses and sovereign wealth funds. Qatari sovereign fund Three Delta said it would accept the Walker proposals during its take-private bid for UK supermarket Sainsbury's, and was a participant in Walker's review.
Simon Walker said the BVCA would launch a recruitment drive: “If sovereign funds and other large private companies join it will ease the concern among our members that in some way they are a special case.”
The proposals will place reporting requirements on companies acquired in a public-to-private transaction with a market capitalisation at the time of acquisition in excess of £300 million (€419 million; $619 million), or in a secondary or other transaction with an enterprise value greater than £500 million.
A concession has been made to critics who have claimed the report places companies with a large international footprint at a disadvantage to their competitors. Eligible companies must have more than 50 percent of their revenues generated inside the UK and employ equivalent to more than 1,000 full-time UK workers.
Companies will be expected to publish a report on their websites within six months of year-end. This must substantially comply with part of the Companies Act 2006, which had hitherto been only applicable to public companies. The adoption of this section had been an open question in the initial consultation document.
RAPID FUNDRAISE FOR SEGULAH
Swedish mid-market private equity firm Segulah has closed its fourth fund on a hard cap of SKr5 billion (€543 million; $778 million). The fund was five times oversubscribed seven weeks after fundraising was officially launched. All limited partners in the firm's previous €250 million fund re-invested. The fund's only Swedish investors were a few entrepreneurial families. The Segulah management team – headed by managing partner Christian Sievert – is a large investor in the fund, having committed seven percent of the total. Managers typically commit around two percent. The fund received commitments from 16 new investors, including pension funds, insurance companies, endowments and foundations based in countries such as Japan, Australia and the US. The fund will invest in businesses with revenues of up to SKr4 billion and values below SKr3 billion. MVision acted as global placement agent to the fund, while SJ Berwin was legal counsel.
DUBAI ACQUIRES STAKE IN MARFIN
Dubai Financial Group, owned by Dubai Holding, has spent €374.5 million ($545 million) on a 6.45 percent stake in Greece's Marfin Investment Group. The Dubai firm acquired 53.5 million shares at €7 per share, increasing its stake in Marfin Investment Group from 9.6 percent to just over 16 percent. Andreas Vgenopolous, executive chairman of Marfin Investment Group, will join Dubai Financial Group as chairman of its subsidiary DFG South Eastern Europe for a period of five years. The Greek investment group raised a €5.19 billion pool of capital in July this year from the public markets, becoming the world's biggest listed private equity fund. The deal was the second acquisition of a stake in an alternative investment firm's holding company in less than a week by a Dubai Holding unit. Earlier, Dubai International Capital bought a 9.9 percent stake in Och-Ziff for $1.18 billion as the US hedge fund manager approaches an initial public offering.
BANK OF SCOTLAND BUYS INTO UK INVESTOR NETWORK
Bank of Scotland Corporate, the business arm of UK bank HBoS, has taken a strategic 19.9 percent stake in Pi Capital, a UK investor network that counts some of the country's highest profile financiers in its ranks, for an undisclosed sum. No shares were sold by existing Pi shareholders in the deal. Pi Capital finds growth equity and alternative asset investment opportunities for its members, and negotiates participation in private equity deals. Now it hopes to gain access to the bank's pipeline of growth equity deals and a range of investments in other asset classes, while the bank expects to tap the network of renowned financiers on Pi's books. David Giampaolo, chief executive of Pi Capital, told sister website PrivateEquityOnline.com: “The number one complaint from members in the past has been they wish they could see more investments. This is a transformational deal.”
PENSIONS HAVE MODEST PE RETURN EXPECTATIONS
Pension funds' expectations of private equity returns are lower than private equity managers, according to a report by accountant KPMG and UK researcher CREATE-Research. The report surveyed 61 global pension funds and 239 alternative and long-only managers. Pension funds expect private equity funds to produce returns of 11 percent, while managers expect clients to demand 18 percent. Managers believed private equity would be the strongest performing asset class, while pension funds believed quantitative funds, long-only high alpha funds and infrastructure funds would do better with an average performance of 12 percent. The disparity can partially be explained by differing views on the severity of the credit crunch, according to the authors of the report, KPMG partners Jon Mills and Anthony Cowell.
ALPHA EXCEEDS E300M FOR CEE FUND OF FUNDS
Switzerland's Alpha Associates has held the final close of its second Central and Eastern European fund of funds on €309 million ($441 million). Alpha will invest in various funds in the region targeting the mid-market, expansion finance, the secondary market and direct co-investments. According to the firm, the fund is already 40 percent committed. Insurer Allianz Group has underwritten €100 million of the fund to provide partial protection of investors' capital, in a transaction arranged by Swiss Alternative Asset Brokers. The fund attracted institutional investors from Europe and the US including the European Bank for Reconstruction and Development, a special purpose vehicle arranged by US bank Merrill Lynch, Swedish bank Hansabank, and US insurance company Minnesota Life.