Merrill Lynch returns to private equity

Thick and fast they came at last’, to borrow from Lewis Carroll. Merrill Lynch & Co is the latest US house to admit plans to enter the European private equity market. To be accurate, the thundering herd’s proposed euros 1 billion to euros 2 billion vehicle ($919 million to $1.8 billion) represents not an entry but a return to the European unquoted equity arena that the group quit in the early 1990s when it shut down Merrill Lynch Capital Partners.

The new operation will be headed by Edward Annunziato, the group’s former co-head of investment banking in Europe, Asia and the Middle East. Based in London, Annunziato will head a 20-strong team spread across Merrill’s offices in Paris and Frankfurt, and possibly also at bases in Madrid and Milan.

Although Merrill currently has no direct private equity presence in Europe, the private equity division of its UK subsidiary Mercury is a prominent mid-market buyout player in the UK.

Annunziato could not be reached by press time, while Ian Armitage, head of Mercury Private Equity, was uncharacteristically reluctant to comment on the initiative. However, Annunziato has reportedly confirmed that the new private equity operation will be integrated with Merrill’s European investment banking business and will work closely alongside group clients, preferring to act as a co-investor rather than a competitor.

Merrill Lynch’s earlier European private equity business never raised third-party funds, so it will be interesting to see how investors react to the combination of the powerful Merrill Lynch global brand and an ambitious first-time offering targeting what is becoming a very seriously heated – and crowded – market.