DLJ Eyes European Deals

Donaldson Lufkin & Jenrette is poised to beef up its London-based private equity operation as part of the overall expansion of the investment bank’s European business.

Andrew Rush, a managing director of DLJ’s New York private equity operation, is expected to relocate from New York to London to source investment opportunities for DLJ’s $3 billion (ecu 2.76 billion) Merchant Banking Partners II international equity fund. At press time, Andrew Rush had not yet made a final decision on relocation.

DLJ already has a direct presence in the UK private equity market through DLJ Phoenix Private Equity, which last year closed its second fund, Phoenix Equity Partners II, on GBP133 million (ecu 200 million). As well as managing this fund and its GBP50 million predecessor, the DLJ Phoenix Private Equity team, headed by David Gregson, took on a role sourcing deals for DLJ Merchant Banking Partners II following DLJ’s acquisition of Phoenix.

Discussing the likely new arrangement, David Gregson said that if Andrew Rush does move to London, he would in all probability build a team of three to four professionals to work in parallel with the New York office on European deals for the $3 billion fund. At the same time, the existing six-strong DLJ Phoenix Private Equity would continue to play an active role in sourcing larger transactions for the Merchant Banking Partners vehicle.

The recent opening of a DLJ office in Paris may provide further scope for extension of DLJ’s Continental private equity interests. Following the closing of the Merchant Banking Partners II fund, DLJ entered into a non-exclusive agreement to source Continental investment opportunities with Gilles Cahen-Salvador, Jean-Daniel Camus and Renato Mazzolini, partners in the former LBO Europe group. Under the terms of this agreement, the team refers any suitable potential investment opportunities to DLJ Merchant Banking Partners; the fund, meanwhile, is also free to consider deals referred through a variety of other channels.

DLJ Merchant Banking Partners, which closed in 1996, is less than one-third invested at present. DLJ therefore has ample firepower at its disposal for major European acquisitions, should suitable opportunities emerge. So far, though, the group’s notable absence from the European mega-deal feeding frenzy suggests that it is adopting a highly selective approach abroad, as well as in its domestic market. Meanwhile, Phoenix Equity Partners II, a later-stage fund focusing on UK deals, has so far invested around GBP40 million in five deals: Pirtek, Newmond, CE Heath, Integrated Dental Holdings and Aerial. David Gregson said at press time that a further deal, which would take the fund to around 35% invested, was imminent. The first Phoenix fund, a GBP50 million vehicle, made 15 investments, of which eight have so far been realised, returning well over 100% of drawn down capital to investors.