Close Brings NatWest Into Billion-Plus Club –

NatWest Equity Partners (NWEP) late last month closed its first external equity fund at GBP1 billion ($1.6 billion), substantially more than the group’s original target.

When NWEP launched its European Private Equity Fund in late 1997, the managers hoped to bring in approximately GBP350 million ($560 million) from new third-party sources, to be matched by commitments from existing clients. Demand from both constituencies proved sufficient to boost the fund by GBP300 million to its cap level.

NWEP Chief Executive David Shaw said investors new to NWEP provided between GBP550 million and GBP600 million. NatWest Bank itself committed 20% of the fund alongside increased commitments from NWEP’s existing U.K. clients. NWEP declined to identify L.P.s in the fund.

Industry sources said the new investor line-up includes two major U.S. public pensions, two leading European insurance companies, a prominent Middle Eastern investment group and a leading U.K. private equity investor. U.S. investors provided approximately 45% of new commitments, with European sources providing a similar amount, while the balance was drawn mainly from investors in the Middle East and Japan. Prior investors Shell Oil Co. and Rover Group also have signed on for the effort.

The fund gives NWEP the capacity to underwrite as much as GBP150 million of equity for a single deal and has boosted the group’s funds under management to GBP2 billion.

Evening Out Its Strategy

During 1998, NWEP deployed slightly more than GBP350 million in 30 investments, with a third of the total invested in continental European companies. Going forward, Mr. Shaw said he expects a more even division between U.K. and continental European investments, reflecting the increased activity in mainland Europe. Approximately half of the GBP220 million European Private Equity Fund has been deployed in companies outside the U.K.

Although the new fund substantially increases the resources at NWEP’s disposal, the group will continue to focus on deals in the GBP10 million to GBP200 million range, concentrating on acquisitions alongside management in the European corporate marketplace. Mr. Shaw said NWEP believes that its focused approach, combined with a team of senior managers who have worked together for 10 years and achieved an upper quartile track record, were strong selling points for the new fund.

Jerome P. Greene & Associates and Salomon Smith Barney acted as placement agents for the effort, which is structured as a series of parallel 10-year limited partnerships and has standard terms.

NWEP expects the fund to reach full investment within three years and therefore is likely to return to fund raising during the second half of next year.