Hope this isn’t a sign of things to come. With depressingly perfect timing, news of the State of New York’s “ban” on placement agents broke just after we read that two placement agencies would close their doors. This morning’s issue of Private Equity Insider states the placement agent businesses of both William Blair and Citigroup have shuttered their fundraising practices.
The publication reported that former William Blair placement agents plan to continue to work together, possibly through creating a new fund marketing firm. Emails to professionals within William Blair’s practice were bounced back. UPDATE: A William Blair representative confirmed the business was closed.
Citigroup’s practice, led by Doug Blagdon, had 45 people on staff. The external fundraising group was recently combined with an internal operation, which has fueled investments in such vehicles as Metalmark Capital. Blagdon did not return calls.
It’s natural that some placement agencies will close down in this kind of fundraising environment—firms are not coming to market with new vehicles if they can help it, so the demand for their services, much the demand for IPO underwriters or M&A bankers, has fallen off a cliff. (However, if any masochistic funds are coming to market, I’d assume they’d be hungry for all the help they can get.) Still, it’s a bad week for the placement agent. After Carlyle Group announced it would raise its funds sans placement agents and the New York State Comptroller DiNapoli announced the State of NY’s “ban” on the advisory service, it appears both side of the fundraising game are anxious to distance themselves from the practice.
Let’s just hope, for the sake of the honest players in the industry, such bans and denouncements don’t extend beyond those implicated in the recent scandal.