Supported by UBS, Phildrew Aims for GBP300 Million

Fund raising for Phildrew Ventures’ fifth and largest fund was well advanced by late 1998. With a target of GBP300 million (ecu 426 million), the Phildrew Ventures Fifth Fund is nearly double the size of its predecessor, which raised GBP164 million in 1995. Phildrew, however, will need to raise only GBP150 million from third parties to hit its target, thanks to a commitment of GBP150 million from UBS Capital Partners.

UBS Capital Partners took a majority shareholding in Phildrew Ventures in the spring of 1998, integrating the UK manager into its European private equity division. Its very substantial commitment to the latest Phildrew offering compares with a contribution of less than 10% of the fourth fund’s total and underlines the strategic advantages of integrating Phildrew into the UBS Capital Partners network. The fund commitment represents the first time UBS Capital Partners has been in a position to secure significant exposure to UK private equity. Previously the group, which invests off its parent’s balance sheet, was precluded from investing in Europe’s dominant private equity market because it would have been in direct competition with third-party funds managed by Phildrew, itself a subsidiary of UBS’s fund management arm.

The increased size of the fifth fund gives Phildrew a capacity to undertake larger transactions than previously. Partner Ian Hawkins said that while Phildrew would preserve its focus on UK mid-market buyouts and buy-ins – which does not preclude investment in a limited number of attractive early-stage or development capital opportunities – it would “cut out some smaller deals and open the door to larger ones, but the key message is More of the same'”. Whereas in the past Phildrew has targeted deals in the GBP10 million to GBP100 million range, it will now concentrate on transactions valued at between GBP20 million and GBP200 million.

The new fund’s remit covers the UK and Ireland, and Phildrew will not lead transactions in other European markets, which are covered by the rest of UBS Capital Partners’ network. It will, however, benefit from an increased flow of multi-jurisdictional transactions channelled through the UBS network, and from co-investment with UBS Capital on larger deals.

Fund raising is proceeding well, according to Ian Hawkins, who said that Phildrew has concentrated on marketing to major investors in the group’s earlier funds. Given that the fourth fund was scaled back after attracting commitments of more than GBP200 million, prospects for reaching the fifth fund’s target without recourse to a wider marketing exercise look good. It is, however, possible that one or two first-time participants may join the fifth fund, capacity permitting: “While we didn’t set out to target new investors, some new investors have been talking to us”, Ian Hawkins admitted, but he emphasised that previous investors would be given first priority.

The group hopes to hold a final close on Phildrew Ventures Fifth Fund, that will have an eight-year life, during the first quarter of 1999, a schedule that will accommodate participants wishing to commit from their 1999 private equity allocations.

The fourth fund, which began deployment in early 1996, is currently some 90% invested and has already seen three realisations from its portfolio: Mayfair Taverns; Trident Automotive; and Greetings Store Group.