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Western Europe & Israel: May 2003

Baring targets $500m for global buy-out fund, Industri Kapital veteran sets up new private equity firm, European privately owned companies continue to lose confidence in the economy…

Baring targets $500m for first global buy-out fund
Baring Private Equity Partners is targeting $500m for its first global buy-out fund. The move is based on expectations that increasing international trade will fuel the growth of companies in relatively untapped emerging markets. Baring plans to market its global fund to insurance companies, pension funds and other investors that don't have the resources to select funds across the world. The firm is joining Advent International, which has a $2bn global fund, and Warburg Pincus, which raised a $5.3bn global fund last year.
AltAssets 1.5.03

Swiss Private Equity Holding sells fund investment to cut outstanding commitments
Private Equity Holding, the troubled Swiss listed fund of funds, has sold one of its US venture fund investments in a secondary market transaction as part of its ongoing efforts to scale back its outstanding commitments. The firm said in a statement that the investment represented a total original commitment of CHF54.3m of which CHF15.4m had already been paid in. It did not disclose the counter-party.
AltAssets 6.5.03

European institutions should bolster private equity allocation
European financial institutions should bolster their allocation to private equity, according to a report by Standard Life Investments. The Global Outlook bulletin argues that it is possible for institutions to produce better returns by increasing their commitment to the asset class, without significantly increasing their exposure to risk. The report suggests that an optimum allocation could be as high as 20 per cent.
Real Deals 8.5.03

Mega-funds starting to struggle as UK's Doughty Hanson finds life difficult
UK-based pan-European buy-out firm Doughty Hanson is struggling to leave the starting blocks in its bid to raise E3bn for its latest fund. With just three weeks to go before the fund's first close the firm has yet to receive more than E500m in equity commitments. Doughty Hanson IV eventually began fundraising in October last year, its launch having been delayed on two separate occasions. The firm has since faced fierce competition from a number of well established firms including Permira and 3i, which are currently targeting E4.95bn and E3bn respectively.
AltAssets 12.5.03

UK Lion Capital launches life sciences $100m fund
UK Lion Capital Advisers has announced the launch of a $100m fund. The fund will focus on early to mid-stage life sciences and technology companies, located principally in the UK. The objective is to raise $75m with an option to raise a further $25m. Lion Capital is predicting a close at the end of July this year and expects the fund to be fully invested within nine months.
AltAssets 1.5.03

Finnish MB Funds holds final close at E117m
The Finnish private equity firm MB Funds has held a final close on its third fund at E117m. MB Equity Fund III was launched in early 2002. MB's buy-out fund attracted 19 Finnish institutional investors, the majority of which were public and corporate pension schemes and insurance companies. Most of the committed capital came from institutions, which had contributed to earlier MB funds, but the firm was also able to widen its investor base.
AltAssets 13.5.03

Europe's leveraged buy-out market faces tough times
Europe's leveraged buy-out market is facing a tough year ahead, according to Fitch Ratings. The modest level of activity so far in 2003 supports Fitch's view that weak market conditions will extend gestation periods for new transactions as sponsors, investors and lenders scrutinise potential deals.
EVCJ May 2003

UK Quester raises £22m for fifth private investor fund
Quester, the UK venture capital firm, has raised its fifth fund, closing Quester VCT 5 at £22m, despite a tough fundraising environment. The fund was launched last December and has targeted high net worth individuals in the UK. Investors have contributed between £3,000 and £100,000 to the fund. Existing investors accounted for the majority of the fund's contributions.
AltAssets 5.5.03

Basel II may have negative effect on private equity industry
Basel II, the agreement that will ensure banks have adequate capital to cover credit risk, could have a detrimental effect on the private equity industry, the British Venture Capital Association has warned. The BVCA has calculated that banks will have to increase risk allocations for private equity investments from eight per cent to 32 per cent. Such a significant increase may stop banks lending and will therefore damage the leveraged buy-out market.
eFinancial News 26.5.03

European venture investment plummets in established regions but resilient in emergent markets
Venture capital investment plummeted in all major European markets in the first quarter of 2003 but emergent markets proved more resilient to depressive global conditions, according to new figures released by Ernst & Young and VentureOne. The four largest European markets, Germany, France, UK and the Nordic region accounted for just 78 per cent of venture investment in Europe in the first quarter of this year, a dramatic drop from 92 per cent in the previous quarter. Conversely, the smaller and less developed venture capital markets of Belgium, the Czech Republic and Ireland all saw the value of investments rise on the previous quarter.
AltAssets 14.5.03

Englefield Capital tops up debut fund with high net worth capital
Englefield Capital, the European mid-market private equity firm set up by former Warburg Pincus professional Dominic Shorthouse and Switzerland-based Cofra, has announced the close of its debut fund with commitments totalling E700m. The Englefield Fund held an initial close on E660m in January, which included a E495m commitment from Cofra. Additional institutional investors include AXA Private Equity, the Dutch Shell Pension Fund and Delta Lloyd. Englefield has raised the additional E40m from its Affiliates Fund, which has secured commitments from approximately 150 high net worth individuals, including Harvey Goldsmith, Chris Ingram and Dermot Smurfit.
AltAssets 13.5.03

UK private equity industry not spared the gloom in 2002
The UK private equity industry proved unable to escape the gloom experienced almost universally in 2002, according to the latest figures released by the British Venture Capital Association. Fundraising conditions in particular have been tough for private equity firms with the annual value raised plummeting to £7.8bn last year, down 43 per cent from an all- time high of £13.6bn in 2001. Worldwide investment by UK private equity firms fell 11 per cent in 2002 to £5.5bn from £6.2bn the previous year. The average financing across all stages fell slightly to £3.7m from £3.9m. A lack of viable exit opportunities continued to present problems for private equity firms with the number of realisations falling by 24 per cent. Write-offs were the most common form of exit accounting for 28 per cent of divestments, followed by trade sales at 22 per cent.
AltAssets 19.5.03

Close Brothers to manage Bamboo Investments
Michael Stoddart has handed over management of Bamboo Investments, his early-stage high-tech investment company, to the venture capital trust division of Close Brothers. After a series of disappointing dot com investments, Bamboo returned £7m to investors from the original £20m raised in 2000 and the value of its portfolio has decreased from £6m to between £3.5m and £4m.
eFinancial News 21.5.03

UK Charterhouse lowers E3bn buy-out fund target
UK Charterhouse Development Capital has reportedly cut the E3bn target for its new buy-out fund to reflect the deterioration in fundraising conditions. This is the first fund the private equity firm has raised since gaining its independence from HSBC in 2001. Charterhouse originally planned to hold a final closing in April but has so far raised just E2.36bn. The firm has now agreed to settle for E2.5bn by the end of July, according to a report by Bloomberg.
AltAssets 7.5.03

UK-based Alcuin Capital to launch debut fund
UK-based Alcuin Capital is to launch its first independent private equity fund in June. The fund is targeting between £30m and £35m and will focus on investments in small to mid-market UK-based companies in a wide range of sectors. Alcuin was founded by former Banc Boston Capital professionals Ian Henderson-Londoño and Mark Storey. Henderson-Londoño and Storey were responsible for Banc Boston's small to mid-sized buy-out activities and will continue to invest between £1m and £4m in companies valued at under £15m on an independent basis.
AltAssets 19.5.03

Schroder's SVIIT issues £40m convertible bond to raise extra investment cash
Schroder Ventures International Investment Trust (SVIIT) has issued £40m of subordinated convertible bonds and increased its credit facility with the bank in order to free up cash for current investment opportunities. The bonds have an annual coupon of 4.5 per cent and are convertible into fully paid ordinary shares of SVIIT at a conversion price of 480p.
AltAssets 21.5.03

European 3i sees light at the end of the tunnel despite negative returns of £935m
European private equity giant 3i believes that the worst of the economic slump has passed and has raised its dividend by 3.8 per cent despite reporting negative returns of £295m in its year-end results.3i's investment portfolio has suffered a valuation drop of £1.2bn but Michael Queen, the firm's chief financial officer, is attributing the decline to falling stock markets. Queen claims that market movement adjustments accounted for £800m of the loss. In addition 3i wrote off £75m of its investment portfolio, mostly from technology companies, but has emphasised this represents a significant reduction from the value of write-offs made in the previous year.
AltAssets 15.5.03

Johnson sets up turnaround fund
Luke Johnson, the UK entrepreneur known for his involvement in the Pizza Express chain, has set up a turnaround firm to buy ailing companies. Risk Capital Partners has a cash pool of up to £100m to spend on distressed firms. The market for turnaround cases is extremely buoyant in the current economic environment as large companies seek to shed non-core and neglected assets but many private equity firms consider them too specialist to become involved.
eFinancial News 26.5.03

Sigefi and Finnat launch Italo-French private equity fund
French private equity firm Sigefi Private Equity has joined forces with Italian wealth management bank Finnat to launch an Italo-French private equity fund. Siparex Italia aims to raise between E40m and E50m from Italian, French and international investors. Siparex and Finnat have each committed E7.5m to the fund, which will focus predominantly on Italian middle-market companies but will also invest in France. Siparex Italia will invest in a wide range of sectors but with a preference for company and consumer services, industry, agrifood and consumer goods. The fund will invest in companies with sales of E10m to E150m.
AltAssets 27.5.03

UK-based Botts & Company closes German office
Mid-market buy-out firm, Botts & Company, has announced the closure of its German office. Botts joins a growing number of private equity firms that are scaling back their operations in Germany. Botts' withdrawal from the market has been made despite the firm's recent successful exit from its Yxlon investment. Bott's made a three-fold return on its initial investment in the industrial testing company when it was sold to InVision for E39m earlier this year.
AltAssets 20.5.03

Outlook brightens for UK private equity industry
UK private equity firms are confident that the worst of the downturn is over. A renewed sense of optimism should drive venture deal activity in the coming months according to Deloitte & Touche's latest private equity confidence survey. Approximately 25 per cent of those surveyed anticipated an improvement in the economic climate in the next six months, with just 13 per cent expecting conditions to deteriorate further. Increased confidence is expected to make deal pricing easier, which will, in turn, boost transaction activity. Some 66 per cent of respondents said they anticipated an increase in deal volume over the next six months.
AltAssets 27.5.03

Guernsey-based Santis to raise CHF100m for debut fund
Guernsey-based Santis Investments is to target CHF100m with its debut fund. Santis has raised CHF26m so far. The fund is targeting high net worth individuals and entrepreneurs, as well as institutional investors. It will focus on small and medium-sized enterprises in the Santis region, the triangular area of Europe where Austria, Germany and Switzerland meet.
Real Deals May 2003

UBS Capital reports slowdown in Q1 writedowns
UBS Capital, the private equity arm of UBS, has continued to suffer writedowns on its CHF3bn portfolio but the losses slowed in the first quarter of 2003.UBS has lost just CHF123m so far this year compared with CHF389m in the last quarter of 2002. UBS blamed the almost CHF3bn of losses over two years on poor economic conditions and the limited exit opportunities that have affected the entire private equity industry. But the firm has been encouraged by a number of divestments in the early part of this year that have led to gains of CHF70m.
AltAssets 14.5.03

Industri Kapital veteran sets up new Swedish private equity firm
Industri Kapital veteran, Harald Mix, has returned to the private equity industry and is setting up new Stockholm-based firm Altor Equity Partners. Altor is targeting up to E600m for its debut fund, which will invest between E75m and E225m in Nordic mid-market companies. The firm's intended strategy is to work with a limited number of companies and to hold investments for a little longer than is usual.
Real Deals May 2003

VC investment in European biotechs remains robust but belies a less rosy reality
The European biotech market attracted the third-highest amount of venture capital investment ever in 2002 despite the sector contracting for the first time in a decade, according to Ernst & Young's annual European biotech report, Endurance. Europe's biotechs raised a mere E123m on the public equity markets last year, compared with E5.5bn at its peak in 2000. In contrast venture capitalists invested E1.1bn in 2002, accounting for 25 per cent of all venture capital investment and closely following software as the most popular sector.
AltAssets 8.5.03

UK BML and Imperial College London to raise £50m life sciences venture fund
UK-based BioScience Managers Limited (BML), and Imperial College London have launched a joint initiative to raise a venture capital fund. The BML Venture Imperial Fund, with a target of £50m, will make investments in 12-15 start-up and early-stage companies in the healthcare sector. The fund will have exclusive preferential access to opportunities emerging from Imperial and anticipates that approximately 50 per cent of its funds will be invested in young companies built around Imperial science. The remainder will be invested in similar opportunities predominantly in the UK.
AltAssets 12.5.03

EEDA announces first closing despite lack of regional investor interest
The East of England Development Agency has announced a £20m first close on its regional venture capital fund, despite a lack of interest from investors in the region. None of the region's six county council superannuation funds have backed the fund, which is managed by Classic Fund Management, and it has been forced to rely on contributions of £500,000 each from two unnamed county councils in adjoining regions.
Venturedome 23.5.03

German institutional investors to increase private equity allocation
German institutional investors are planning to almost double their private equity allocations, according to a study carried out at the Fachochscule Wiesbaden in conjunction with Swiss fund of funds Adveq. German insurance companies and pension funds are forecasting an increase in their private equity allocation from 1.2 per cent to 2.2 per cent. The projected rise follows reported average yearly private equity returns of 12.5 per cent. This falls well short of historical highs in the private equity industry, but it compares favourably with struggling public markets.
AltAssets 15.5.03

Largest London pension fund moves into private equity
The £1.5bn London Pension Fund Authority, the largest local government pension scheme provider in London, is to commit a portion of its assets to private equity. The local authority has begun a search for a private equity manger to run around five per cent of its pension fund assets. The pension authority will consider both private equity funds and fund of funds and estimates the final mandate will be valued at between £50m and £70m.
eFinancial News 20.5.03

Swiss Partners Group to launch dedicated secondaries fund
Swiss fund of funds manager Partners Group is to launch its first dedicated secondaries fund. The fund will target E300m and will invest 65 per cent of funds in Europe and the balance in the US. Unlike traditional pure secondary financial transactions, Partners Group will focus on ‘managerial' secondaries, which are usually between three and five years old, with between 15 per cent and 20 per cent draw down.
Real Deals May 2003

European privately owned firms still losing confidence in economic environment
The business confidence of European privately owned companies has continued to fall in the latest quarter, according to the latest 3i European barometer index. Five out of the six surveyed regions demonstrated increasing economic pessimism with the solitary exception of a marginal upturn in Germany.The survey shows the lowest levels of optimism about the economic climate throughout Europe since the barometer was launched in 1998. The most significant fall-offs in confidence occurred in Spain and France, while Nordic countries remained the most upbeat.
AltAssets 15.5.03

CapVent to relaunch E400m fund of funds
Swiss private equity fund manager, CapVent, is to relaunch its second fund of funds next month despite predictions of a clear out in the fund of funds industry. The firm originally launched last March but later put fundraising on hold. CapVent's fund of funds will differentiate itself from others in the market by focusing on small to medium-sized private equity funds and new generation managers, the firm said.
eFinancial News 19.5.03

Israeli venture investment enjoys slight upturn but long-term trend still plummeting
Israeli venture activity displayed some signs of improvement in the first quarter of 2003 but investment levels are still well below those recorded in the same period last year, according to new figures released by the Israel Venture Capital Research Centre. So far this year Israeli high-tech companies have raised $211m from domestic and international venture investors, up slightly from $205m raised in the fourth quarter of 2002. But this is still 44 per cent below the $376m raised in the first quarter of last year.
AltAssets 5.5.03

Nordic Capital closes fifth fund at E1.5bn
Swedish buy-out firm Nordic Capital has made a final closing for its fifth private equity fund at E1.5bn. Despite tough market conditions the firm's managing director, Robert Andreen, has reported that the fund was over-subscribed by twice its target value. The new fund is bigger than all of Nordic's earlier funds put together and attracted 60 investors.
Real Deals May 2003

RLPE reaches £64m first close with debut fund
Royal London Private Equity has reached a first close of £64m on its debut fund. The fund has a target of £200m, which it hopes to reach over the next 12 months. Investors in the first closing include Royal London Mutual Insurance Society, clients of Morley Fund Managers and other institutional and private investors. The fund will target companies valued at between £25m and £75m in the financial services, leisure, information technology services and support services sectors.
EVCJ May 2003

European institutional investors predict increase in private equity exits
European institutional investors have predicted a significant increase in private equity exit activity over the next six months, according to a report by business advisor RSM Robson Rhodes. The exit poll reveals that 50 per cent of institutional investors believe the number of private equity exits will increase despite tough market conditions. In addition, 79 per cent of respondents expect to see an increase in secondary buy-outs with 65 per cent believing that an increase in secondary buy-outs is a good thing for institutional investors.
AltAssets 27.5.03

London-based Schroders launches second fund of funds
London-based Schroders has launched its second private equity fund of funds. The asset management group is targeting E250m to soak up excess demand for its first fund that closed at E242m a year ago. Schroder Private Equity Fund of Funds II has been structured to meet the requirements of both small and large institutions as well as high net worth individuals. The investment vehicle offers investors the choice of three separate share classes with differential pricing, allowing for a minimum investment of E125,000.
AltAssets 6.5.03

UK corporate venturing comeback ahead
British corporate venturing could be staging a comeback according to venture consultancy Greenhouse Ventures, and Corporate Venturing UK. Over a third of major British companies surveyed expected their level of corporate venturing activity to increase over the next three years. The most positive responses came from companies in the retail and servicing sector, while manufacturing companies were the most negative with 53 per cent of them saying corporate venturing would never be a part of their strategy.
EVCJ May 2003

Nordic Industri Kapital reported struggling to raise buy-out mega-fund
Nordic private equity firm Industri Kapital has raised just 20 per cent of its target E2.5bn with only a month to go before the fund's first close, according to the Financial Times. Industri Kapital joins a growing number of European mega-funds that have struggled to reach fundraising targets in recent months. The Nordic region's largest buy-out firm has so far raised just $500m in an intensely competitive fundraising environment, despite undergoing a lengthy 12 month marketing campaign prior to launch.
Financial Times 30.5.03