Granville seeks money from parent

UK investment bank Granville & Co, which had made no secret of the fact that it was seeking new investors, has been acquired in a GBP37 million ($62 million) deal by Robert W Baird, a US investment banking and brokerage firm, which is itself a subsidiary of NorthWestern Mutual Life (NWM). In Europe, the bank will now be known as Granville Baird.

The acquisition appears to have largely positive implications for Granville Baird’s European private equity operation, Granville Private Equity Managers (GPEM). It is engaged on raising its sixth fund, a GBP200 million ($334 million) vehicle destined primarily for investment in the UK and Germany. A bridgehead into the European market, meanwhile, could prove equally valuable to Baird Capital Partners, which is currently conducting its fourth fund-raising exercise, targeting $200 million (euros 184 million).

NWM, Baird’s majority owner, is a long-standing investor in European private equity vehicles and is also one of specialist mezzanine provider Intermediate Capital Group’s key clients.

Michael Proudlock, GPEM’s chief executive, says the private equity business expects to reap substantial benefits from its new parentage. “From our point of view, NWM’s existing exposure to European funds is a good thing, and we hope we will justify significant support from that source in future,” says Proudlock. He explains that GPEM was increasingly aware of a danger that it could become marginalised as being neither one thing nor the other’. “We are not an independent, but neither did we have the resources of a large parent behind us,” says Proudlock. Although to date, GPEM itself had not suffered any adverse impact from its status – although the Granville fund-of-funds business, Greenoak, experienced significant delays in getting its latest fund-of-funds off the ground prior to its link with United Overseas Bank – Proudlock evinced a measure of relief at the outcome of the parent bank’s search for new capital.

The strategic match between the two banks is close enough to offer significant synergies. Both focus on growth companies and have developed strong sector specialisations. Granville’s principal areas of strength are information technology, staffing, outsourcing, media and leisure. Both information technology and staffing feature among the ten growth sectors covered by Baird’s research teams.

The two private equity businesses -GPEM and Baird Capital Partners – will co-exist but remain separate. Proudlock says: “The reality is that the US market is very different from Europe and requires a different style of operation.” He does not, however, rule out the potential for the two private equity operations to work more closely together in future.

For GPEM, however, the most immediate tangible benefit of the Baird/Granville deal must be the US bank’s $10 million commitment to GPEM VI.

GPEM has pencilled in a date in mid- to late November for the new fund’s final close. Proudlock expects the final total to be close to the target level and reports that the vehicle, which encountered strong interest in continental Europe, has attracted a broad cross-section of investors.