Slideshow: A Selection of Euro Buyout Fund Terms and Conditions

It’s a competitive private equity world out there. Especially for those firms on the fundraising trail or about to embark on a mega fundraising. We thought it might be interesting to take a look at the terms and conditions of a handful of the major European buyout houses fundraising at the moment and who had successful fund closes last time around 2006/2007. Have their terms and conditions changed to become more competitive? Fund targets have certainly come down and become less ambitious. Those firms who raised the mega euro buyout funds in the 2006/2007 fundraising boom such as Apax Partners and Permira for example are targeting lower (and some say more realistic) amounts of €9 billion and €6.5 billion respectively.

According to research from European placement agent Acanthus Advisers, the European buyout market (including mega, mid-market and lower mid-market) will be seeking to raise some €130 billion over the next 24 months and the relationship between LPs and GPs remains as challenging as ever.

Armando D’Amico, managing partner of Acanthus Advisers, says: “As a huge number of funds are expected to come to market over the next year, chasing scarce capital, the quality of a GP’s communications and relationships will in many cases be a decisive factor.”

He says that some of the 2006/2007 funds are still only 30% invested and fund managers are investing slowly and have even requested extensions of their investment periods.

According to Acanthus’ LP-GP Survey 2011 published at the end of last month, there is little agreement on terms and conditions and on the level and quality of communications to investors. Acanthus interviewed senior LP and GP personel in Europe and the US receiving 60 responses of which 33 came from LPs and 27 from GPs. Over three quarters of LPs agreed that GPs should invest more in their own funds in order to promote a greater alignment of interests – just 22% of GPs agreed, but there is evidence that their opinion is shifting in line with the LP view, according to the survey.

On a positive note, the research found that only around one in ten LPs and GPs thought the overall relationship was weak, while a majority of LPs (58%) believed the IR process had improved over the past year.

In this slideshow peHUB takes a look at some of the terms and conditions on offer in the European buyout fund marketplace.

[slideshow]

[slide title=”Advent International”]

Team Size: 170-180
Fund Name: GPE VII
Fund Size (€bn): Undisclosed as yet
Previous Fund (€bn): 6.6
Previous Fund Vintage: 2008
Ownership: Private
Geographic Scope: Global
Transaction Fees: Undisclosed as yet
Single Asset Class: Yes
Management Fee: Undisclosed as yet
Strategy/Investment Remit: 5 sectors (Business and financial services; healthcare; industrial; retail, consumer and leisure); international investment; Upper mid-market buyouts; Focus on growth opportunities, cross-border transactions & strategic repositioning

[slide title=”Apax Partners”]

Team Size: 108
Fund Name: AVIII
Fund Size (€bn): 9.0
Previous Fund (€bn): 11.2
Previous Fund Multiple of Invested Capital/Vintage: 1.3x/2007
GP Commitment to Fund: 4%
Ownership: Private
Deal-by-Deal Carry: No
Geographic Scope: Global
Transaction Fees: 100% offset
Institutional Limited Partners Association Compliant: Yes; Independent LP chairman
Single Asset Class: Yes
Management Fee: Headline 1.5%
Succession Management: Yes
Strategy/Investment Remit: – Global buyouts; 5 sectors – Financial and business services; Healthcare; Media; Retail and Consumer; Tech and Telecom

[slide title=”BC Partners”]

Team Size: Approx 70
Fund Name: BCEC IX
Fund Size (€bn): 6 (hard cap 6.5 billion)
Previous Fund (€bn): 5.9
Previous Fund Multiple of Invested Capital/Vintage: 1.5x/ 2005 (first investment made in 2006)
Deal-by-Deal Carry: No
Geographic Scope: Europe
Institutional Limited Partners Association Compliant: Endorse ILPA guidelines
Single Asset Class: Yes
Management Fee: 1.5%
Strategy/Investment Remit: 6 Sectors – business services; consumer; financial services; healthcare; industrials/ TMT; European companies; €100m+ equity cheque

[slide title=”Cinven”]

Team Size: 64
Fund Name: Cinven V
Fund Size (€bn): 5.0
Previous Fund (€bn): 6.5
Previous Fund: 2006
GP Commitment to Fund: Not disclosed
Ownership: Private
Deal-by-Deal Carry: No
Geographic Scope: Europe
Single Asset Class: Yes
Management Fee: 1.5%
Strategy/Investment Remit: 6 Sectors (business services, consumer, financial services, healthcare, industrials and TMT); European companies

[slide title=”Permira”]

Team Size: 90
Fund Name: Permira V
Fund Size (€bn): 6.5
Previous Fund (€bn): 9.6
Previous Fund Multiple of Invested Capital/Vintage: 3% net IRR/2006
GP Commitment to Fund: Not disclosed
Ownership: Private
Deal-by-Deal Carry: No
Geographic Scope: Europe
Transaction Fees: No
Institutional Limited Partners Association Compliant: Endorse ILPA Principles
Single Asset Class: Yes
Management Fee: 1.5%
Succession Management: Addressed three years ago
Strategy/Investment Remit: 5 Sectors (consumer, financial services, healthcare, industrials, TMT); long-term investment

Source: Thomson Reuters Research
[/slideshow]