Coller Capital and financial advisor Abbey National struck a deal that lets Abbey get rid of almost all of its private equity holdings. Coller acquired 41 private equity funds and 19 European-based portfolio companies with the transaction, which closed in December. The deal between the two London-based firms sets a new record as the largest single-buyer secondary private equity transaction to date, with Abbey’s commitments totaling approximately $1.33 billion.
While neither Coller nor Abbey would disclose the amount paid for the assets, reports from the U.K. indicate that Coller Capital shelled out between $554 million and $646 million for the assets, including a secured loan note of $286 million. This is a significant discount considering all but $290 million of the $1.33 billion portfolio has been drawn down.
Abbey will disclose the price paid in the deal when it releases its 2003 final financial statement next month. A small team at Abbey will manage the few assets that remain until they mature or are sold off in individual deals.
This past September, Abbey entered exclusive negotiations with the secondary firm, which imposed its own deadline to get the deal done by the end of 2003. “We chose Coller because they were willing to give us a fair price for the assets,” said an Abbey National spokesman.
The bulk of the value in the deal rests with the 41 funds changing hands. The funds are comprised of 70% buyout investments, with the remaining funds split between mezzanine and venture. Fund interests in the transaction include those of European firms Advent International, Apax Partners, Bridgepoint Capital, Duke Street Capital and Schroders. U.S. funds involved include Goldman Sachs, Thomas H. Lee Partners and Warburg Pincus.
For Abbey, the deal effectively ends its private equity business, which it began to dismantle early last year in its effort to bail out of all businesses “no longer core” to its strategy. They began selling other assets of their private equity portfolio throughout 2003.
“They were able to sell their best funds early on in the process. What was left was some of the more mature assets that a traditional secondary player would be interested in,” says one secondary market observer. “It’s a good portfolio; it’s a transaction that the market knew was going to happen, so it’s not a surprise.”
The deal shows a possible thaw in the deal flow of large private equity portfolios on the secondary market. While secondary firms have raised record numbers of funds, buyers have not seen the deal flow expected to follow given the enormous jump in private equity investment over the last 10 years. “This transaction gives you plenty of evidence of how the secondary market is able to close deals and provide liquidity,” said Tim Jones, a Coller Capital partner. “An institution can liquidate assets that aren’t core. It was a fair deal for them and a fair deal for us.”
The deal follows in the footsteps of the previous record-holder for largest secondary private equity deal. Late last year HarbourVest Partners announced that it had sealed the long-rumored deal with UBS for a significant share of its private equity portfolio. The deal gave HarbourVest 52 limited partner interests in both venture capital and buyout funds. The commitments that UBS made in the portfolio totaled $1.3 billion. Unlike the Collar and Abbey deal, HarbourVest and UBS formed a joint venture specific to the transaction, named Tresser, to acquire and manage the partnerships. Almost a year ago, Coller Capital was a principal player in Deutsche Bank’s sale of $1.5 billion of private equity investments in the deal that created MidOcean Partners.