BC Partners has raised 6.5 billion euros ($8.6 billion) for new deals, making the largest buyout fund any European private equity firm has had since the onset of the credit crisis.
Even with the region’s markets roiled by the sovereign debt crisis in Greece and other eurozone nations, BC Partners raised more than it had expected, providing a ray of hope for a raft of other big private equity firms aiming to tap picky investors for new capital.
Only US group Blackstone has been able to raise a larger pool of capital, gathering $16 billion for its latest fund, a process that took four years.
The new fund will enable BC Partners, which started life as the private equity arm of Barings Bank, to keep up its deal rate, having been among the most active in Europe last year, with four takeovers including Italian fashion retailer Gruppo Coin and mobile phone shop Phones 4u.
BC Partners, which also owns Swedish cable group Com Hem and embattled sports club operator Fitness First, has been raising its ninth buyout fund since 2010, under the guidance of managing partner and former Goldman Sachs banker Charlie Bott.
It tapped new investors, including sovereign wealth funds in the Middle East and Asia, for the fund, its largest to date, which was oversubscribed and took 18 months to complete.
The fund eclipses that of Swedish rival EQT, raised last year, and will provide encouragement to others including Cinven, Permira and Apax Partners, that they can successfully raise new capital, even though the process can be long and hard, with concessions often needed on fees.
Buyout firms were so flush with cash that they routinely turned away investors at the height of the buyout boom five years ago.
Now the boot is on the other foot, as their traditional backers such as pension funds, banks and insurers have less capital to invest.
It takes two to three times as long to raise a private equity fund as at the height of the boom as investors take their time, Bott said in a telephone interview.
“Their investment committees are requiring them to produce incredibly thorough information, comparing us to other firms they could invest in, and that takes more time,” Bott said. Private equity firms raised $263 billion in 2011, sightly less than in 2010, according to data firm Preqin, and a far cry from the height of the buyout boom leading up to 2007, when they pulled in around $600 billion a year.
As a result, firms have been offering investors concessions on fees to encourage them to commit capital early. BC Partners offered the first wave of investors a 5 per cent reduction in management fees and carried interest — the bonuses paid out to private equity executives. Investors are increasingly focused on the strength of a private equity firm’s team and its track record, Bott said.
Since its foundation in 1986, BC Partners has made investors about three times what they put in, ranking it as a consistent top performer.
But it has had its high-profile troubles too, buying into London estate agent Foxton’s just months before the market crashed, wiping out much of its initial investment.