Apax Partners’ U.S. business will merge with buyout firm Saunders Karp & Megrue, thus further distancing Apax from its venture capital roots. The deal had been negotiated for more than eight months, and results in SKM partners Allan Karp and John Megrue taking over as co-CEOs of Apax Partners Inc. (the non-U.S. operation is known as Apax Worldwide). A new fund-raising drive is expected to launch within the next several months.
Apax Partners was founded in 1969 as Alan Patricof Associates Inc., and made early-stage investments in U.S.-based success stories like Apple Computer and Office Depot. It also gradually created a London-based affiliate named The MMG Patricof Group, which in 1987 had raised a $65.6 million fund dedicated to European deals. Four years later, the domestic group was renamed Patricof & Co. Ventures, while the international effort-now split between the UK and France, and later Israel-was called Apax Partners, after a Greek word meaning once, and only once.
At the time, both groups were still dedicated to venture capital deals, but the Europeans would gravitate toward later-stage as the 1990s progressed. By the time the Patricof & Co. moniker was dropped in favor of Apax Partners Inc. in 2001, the European group was known primarily for its buyouts activity, including the $3.5 billion acquisition of UK-based yellow pages publisher Yell PLC. Apax Partners Worldwide also had far more fund capital under management than did Apax Partners Inc., which still was concentrating on venture capital, despite a handful of later-stage and buyout transactions.
Rather than allowing the two groups to continue on their separate paths, Apax decided in 2002 to merge its U.S. and European operations. The deal was designed to both boost the U.S. buyout business, and also to pave the way for a global mega-fund. Moreover, plans were even drawn up to deal with the fact that the $1.1 billion U.S. fund was scheduled to run out of cash far sooner than was the EURO4.4 billion European fund.
The merger was scrapped in 2004, however, when Apax Worldwide began circulating a PPM for a new European fund with a EURO4.5 billion target (it held a first close on over EURO3 billion late last year). At around the same time, Apax founding partner Ronald Cohen and Apax managing director Martin Halusa approached Stamford, Conn.-based Saunders Karp & Megrue about a possible merger.
“Ronald and Martin called me, saying that they wanted to scale Apax’s U.S. buyouts practice closer to what they had in Europe,” said SKM’s John Megrue, who previously had spent five years as a vice president and principal with Patricof & Co. “It sounded like a very good idea.”