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Electra bows out of Kennet Capital

Broadview, the financial services firm focused exclusively on the IT, communications and media industries, has announced that it bought Electra Partners Europe’s half of their joint venture investment in Kennet Capital in November, and in so doing makes Kennet Capital a wholly owned subsidiary of Broadview. Venture capital firm Kennet Capital has invested exclusively in early stage European technology, Internet and telecoms companies through its GBP48 million fund Kennet I, which was raised by the end of 1997 and is currently 70 per cent invested. The synergies between Kennet Capital and Broadview are clear, and include Broadview passing investment opportunities to Kennet Capital, however Electra Partners Europe is investing outside the technology space and in the mid market. Once regulatory approvals are received it looks likely that Kennet Capital will change its name to Broadview Venture Partners.

Kennet Capital has just closed its second fund Kennet II to which Broadview has committed $50 million of the total $250 million raised. This is in contrast to Kennet I in which Electra was a significant investor with Broadview joining to a lesser degree. Aside from Broadview, investors in Kennet II include Allianz, Bank of America, HarbourVest and Swiss Life.

Michael Elias at Kennet Capital notes the PPM went out in September and the fund was closed, after commitments were scaled back, in early December. Elias puts the speed of the fund raising down to the fact that although Kennet I is just 70 per cent invested the exits from that portfolio have enabled the fund to already return to investors funds in excess of their original commitments. Exits from Kennet I include Altitun, a Swedish optical components company acquired by ADC Telecommunication in May this year and Paragon Software, which was acquired by Phone.com in February this year.

Kennet Capital’s focus will change to take on a global dimension now that Kennet II has been raised, although sector focus remains the same. Up to 30 per cent of Kennet II can be invested outside Europe Kennet Capital has five investment professionals in Foster City, Silicon Valley, California, and another seven in London. Elias notes that although Kennet II is five times the size of Kennet I the aim is to make the same number of investments as in Kennet I and as such the per transaction minimum is likely to fall around $5 million mark and the maximum around $20 million.

Broadview is viewing private equity as a core of its operations going forward and aside from Kennet Capital its interests extend to Broadview Capital Partners, which began operations last year. Broadview Capital Partners runs a $250 million late stage private equity fund that invests in the same space as Kennet Capital. Cross fertilisation opportunities between the two businesses are clear.