– DLJ Phoenix scales up with third fund

DLJ Phoenix, Donaldson Lufkin & Jenrette’s European private equity group, has announced the closing of its third fund. At GBP430 million ($679 million), DLJ Phoenix Equity Partners III represents a step change up from its predecessor, Phoenix Equity Partners II, which raised GBP133 million in 1996.

Hugh Lenon, a director of DLJ’s European private equity group, explains that, although the group may undertake some bigger investments through the new fund, the primary result of the vehicle’s larger size will be a reduction in external syndication. Lenon predicts that the third fund will have an average investment size of around GBP20 million, around twice that of the second fund “which syndicated out more than we invested ourselves”.

Although primarily focused on the UK, the new fund’s remit encompasses other Western European markets, particularly France and Germany, where DLJ has a local presence. As well as mid-market buyouts and expansion capital situations, historically DLJ Phoenix’s core activities, the new vehicle will target larger LBOs, working in conjunction with limited partners and other DLJ funds, and technology companies requiring expansion capital of GBP5 million or more. For these venture investments, DLJ Phoenix will work in close co-operation with DLJ’s Sprout venture capital operation.

Sectors where DLJ Phoenix boasts particular expertise include financial services, IT/support services, media and telecoms.

DLJ itself is committing 15 per cent of the fund. Hugh Lenon reports that the third party capital raised splits more or less equally between existing and new investors. North American investors provided some two thirds of the fund, and the Ontario Teachers’, State of Michigan and Colorado Public Employees’ pension funds were among first-time LPs making substantial commitments. Existing investors upped their commitments to the third fund, and Lenon says the vehicle was way over-subscribed’ and had to be scaled back from more than GBP500 million.

DLJ Phoenix’s recent deals include the double public-to-private’ merger of CE Heath and Lambert Fenchurch, the acquisition of Bucknall Group (another public-to-private), and IMO Carwash, while disposals include Pinnacle Leisure, sold to Cannons, and Pharmaceutical Fine Chemicals, which was acquired by Allied Signal.