UK captive goes it alone

ISIS Equity Partners is spinning out of F&C Asset Management to become a management-owned UK mid-market private equity firm.

ISIS Equity Partners, the private equity arm of fund management company F&C Asset Management, is to spin out of its parent company in a move led by Wol Kolade, the group’s head.

Under the deal, which is subject to regulatory approval, ISIS will become a limited liability partnership controlled by the management team. It will continue to manage private equity assets worth around £500 million ($906 million; €740 million) and retain existing staff and offices in London, Birmingham and Manchester.

[The spin out comes as] a result of Friends Provident having to resolve issues arising from changes to accounting standards.

Wol Kolade, Managing Director, ISIS Equity Partners

The transfer is taking place for no consideration. In an interview with PEO, Kolade said that the spin-out was taking place “as a result of Friends Provident [the insurance company of which F&C is a subsidiary] having to resolve issues arising from changes to accounting standards.”
The issues in question relate to the pending International Financial Reporting Standards (IFRS) that companies operating in the European Union must adopt by January 1. Under IFRS, subsidiaries of which a parent company owns more than 51 percent must be accounted for on the parent company’s balance sheet.

Kolade said that these rules would require ISIS portfolio companies to be accounted for on the balance sheet of Friends Provident even though it doesn’t control them, and would thus unnecessarily affect the accounts of the LSE-listed insurer.

Following the spin-out, F&C, which currently owns 100 percent of ISIS, will retain a 20 percent interest firm. According to Kolade, the restructuring will not trigger any changes to the 80/20 revenue split between ISIS and F&C that is currently in place.

F&C will continue to provide ISIS with marketing, distribution, legal, accounting, secretarial and other support services. The firms said they expected no disruption as a result of the change.
ISIS is currently undergoing a phase of growth, having recently announced a string of new hires as well as plans to open a fourth office in Leeds.

The firm is currently investing a £150 million fund organised in 2003 as a limited partnership. In addition, it also manages four Venture Capital Trusts, totalling around £200 million of assets.
The firm invests in UK companies in transactions valued at between £5 million and £75 million. It also undertakes a small number of deals in mainland Europe.
Friends Provident manages £124.8 billion of assets on behalf of institutional, insurance and retail clients.