UBS Capital Partners Integrates Phildrew

Long-established UK private equity group Phildrew Ventures has become a fully-integrated member of UBS Capital’s European private equity division. The Phildrew Ventures management company, previously a joint venture between the partners and the UBS subsidiary Phillips & Drew Fund Managers (PDFM), is admitting UBS Capital Partners as a majority shareholder. Phildrew’s eight executive partners own the bulk of the balance, while PDFM for the time being retains a small minority holding.

This deal resolves the anomalous situation whereby UBS Capital, which since 1990 has been seeking to establish itself as a major force in private equity, avoided investing in the UK, Europe’s dominant private equity market, because of potential competition with another UBS subsidiary. UBS was, however, able to gain a measure of exposure to the UK private equity market through investment in Phildrew Ventures funds.

UBS Capital Partners, which invests off its parent’s balance sheet, operates teams covering Scandinavia, the Benelux countries, Italy, Switzerland, Germany and France, where it opened its most recent office last year). Phildrew Ventures has raised four third-party funds since 1985 and currently has some GBP400 million (ecu 615 million) under management.

Partner Ian Hawkins confirmed that Phildrew plans to launch a fifth third-party vehicle during the course of 1998. From Phildrew’s point of view, he said, the deal with UBS Capital enables the company to align itself more closely with the overall UBS group and to draw fully on its strengths in private equity investment and private banking, thus enhancing its deal sourcing capacity. Ian Hawkins stated that day-to-day operations at Phildrew would be unaffected by the company’s new ownership structure. Over time, however, the partners expect to see an increase in the number of deals with a cross-border content, together with a gradual increase in average deal size, with the possibility of co-investment with UBS Capital Partners on larger transactions. “We won’t be seeking to emulate Doughty Hanson, but we do expect to move on upwards with the market”, Ian Hawkins explained.

Negotiations between UBS Capital Partners and Phildrew began well before the announcement of the forthcoming UBS/SBC merger. Following this announcement, UBS confirmed that private equity would constitute one of the five core business areas of the new enlarged group. Robert Kahn, head of UBS Capital Partners, predicted that the merger with SBC would bring further benefits to the private equity group in terms of extended networks of industrial and institutional contacts.

According to Robert Kahn, UBS Capital Partners has no immediate plans to enter the third-party fund-raising market. He was unable at this stage to comment on the future role of SBC Equity Partners, whose direct investment activities have been so far largely confined to Switzerland.