BankAmerica, which manages $2.5 billion (ecu 2.3 billion) of private equity commitments through its Global Private Equity division, is strengthening its European presence. Towards the end of last year, BankAmerica Global Private Equity opened a London office, which will operate in tandem with the Warsaw office that was established in the summer of 1996.
Managing partner Bill Obenshain heads the London office. The other team members are managing director Lloyd Perry, who was responsible for setting up the Warsaw operation, principal Jack McCarthy and associate Joshua Spoerri.
Investments in both Central and Eastern Europe are handled by the three-strong Warsaw team, while the London team will invest in Western Europe, with a particular focus on France, Spain and Germany.
The choice of Central, rather than Western, Europe as a starting point for BankAmerica Global Private Equity Europe was consistent with BankAmerica’s overall international private equity strategy of focusing on emerging markets, Bill Obenshain explained. The global private equity business currently comprises six direct investment groups – three covering the US and three with an international focus – and a fund investment team. The Latin American direct investment team operates from the Bank’s Chicago headquarters and the Asian team from Singapore.
The London office was added to capitalise on the Western European proposals the house was receiving as a consequence of the development of its Central European business.
One of these opportunities, and the group’s principal private equity investment in Western Europe to date, was the Spanish group Europa Telecoms. Europa is one of the two major Spanish companies bidding for and winning cable TV licenses, and looks set to become one of Europe’s largest cable companies. BankAmerica invested alongside GE Capital of the US and an unnamed Spanish shareholder.
Other investments in Spain and France are currently in the active pipeline, and BankAmerica is also working to develop a contact base in Germany. Bill Obenshain said the group plans to hire a German national to focus on that market.
BankAmerica Global Private Equity (Europe) will concentrate on buyouts and buy-ins and mature development capital opportunities: telecoms is the only sector in which it will consider funding start-ups. Bill Obenshain said that the size of BankAmerica’s European operation means that it is “more boutique-oriented – four or five investments per annum would be a busy year for us”.
Despite the London location of the second European office, BankAmerica Global Private Equity Europe is not heavily targeting the UK. Bill Obenshain said current competitive conditions mean “new players can’t get a shot at attractive deals at attractive values”.
Elsewhere, he added, “not having fund pressure and only looking at perhaps four or five deals a year, we can be careful not to overpay; we feel we can refrain from playing the auctions game in our major target markets”.
Telecoms Are a Key Area
The European direct equity group has no sector-specific focus but takes an opportunistic approach. However, telecoms, a sector in which the team boasts both industrial expertise and investment experience, is likely to be a particular focus throughout Western, Central and Eastern Europe.
BankAmerica Global Private Equity (Europe) will typically look to invest $10-30 million per transaction and expects to commit a total of $65-75 million in the current year, according to Bill Obenshain.
BankAmerica Global Private Equity has also selectively invested in a few European funds which offer co-investment opportunities. Though all fund investments come under the aegis of the central fund investment group, they are normally “championed” by one of the direct equity investment teams; this has been the case with the European fund investments.
The group is a participant in Alchemy’s UK Investment Plan and in the Bancroft Fund, a Central European vehicle.
Three other European fund investments are “at various stages of closing”, said Bill Obenshain, who declined to name the vehicles but described them respectively as “a UK-based pan-European fund; a fund with an emphasis on the German and Benelux markets; and a large buyout fund”.
The fund investment programme will go forward “very selectively” in parallel with BankAmerica’s direct equity investments in Europe, Bill Obenshain confirmed: “We will only participate in funds which will provide us with significant advances in our direct investment strategy”. He added “We can’t do too many fund investments, or they could run into each other and saddle us with conflicts”.
Will Scale Up Gradually
BankAmerica is also acutely aware, of the need to manage its own growth, Bill Obenshain said. “We view this as a low-volume business: scaling up too quickly could result in quality problems. Also, while in terms of most US banks’ involvement, BankAmerica is a major private equity player, we are nevertheless subject to capital allocations”.
Asked for an indication of the size of BankAmerica’s European private equity business five years hence, Bill Obenshain said it is “likely to be the equivalent of a $300-400 million fund”.
Currently, BankAmerica has a Central European direct investment portfolio totalling some $20 million. The Warsaw team is actively sourcing deals at present, and BankAmerica expects to add substantially to this portfolio during the current year, as well as laying the foundations of a Western European business.
With at least three possible investments in negotiation at present, BankAmerica BankAmerica Global Private Equity expects an active first half of 1998 in Europe.