Barclays PE to spin out, raise new fund

Barclays Private Equity is set to spin out of bank ownership this summer ahead of a new fund-raising effort from the mid-market buyout specialist in the autumn, people familiar with the situation said.

Barclays PE is one of the few remaining London-based buyout firms under bank control, but talks have been going on for more than a year between the bank, the private equity division’s management and its investors about a possible spin-off.

Those talks are likely to result in a deal this summer, sources said, with Barclays PE management pushing for a deal to embark on their next fund-raising round.

A management buyout is likely to be worth a limited amount to Barclays, one of the sources said, but would underline its drive to focus on core areas. That has intensified as regulators clamp down on banks’ involvement in higher risk businesses.

It is widely expected among the private equity investor community that Barclays’ $3 billion fund raised in 2007 would be the last under its umbrella. About 70% of the fund has been invested.

Britain’s second biggest bank recently called a halt to new deals at Barclays Ventures, the small-cap buyout arm focusing on companies worth about $14.5 million to $72 million.

It is unclear whether Barclays, which put more than $800 million into the last fund, will commit anything to the new fund.

Private equity firms are working harder to raise the same amount of capital as during the buyout boom as cash-strapped investors tell them they have less to invest.

Buyout house BC Partners is set to launch a $7 billion fund launch later this year but expects to have to sign up more investors to achieve the same amount it raised in 2005. —Simon Meads, Reuters