Friends Ivory & Sime (FIS) is relaunching Ivory & Sime Baronsmead as Friends Ivory & Sime Private Equity, with an initial mandate to build a portfolio of venture assets worth GBP50 million (ecu 74 million) for its controlling shareholder, the Friends Provident Life Office (FPLO). The UK venture group came under FIS’s aegis as a result of the Friends Provident Asset Management/Ivory & Sime merger earlier this year.
FPLO’s main life fund, currently valued at some GBP14 billion, has hitherto had only modest exposure to private equity. While GBP50 million represents only a tiny proportion of the life fund’s total assets, it is a very substantial single commitment in terms of FPLO’s previous sector exposure and a resounding vote of confidence in the ambitious and expansionist business plan drawn up by FIS Private Equity.
Historically, Ivory & Sime Baronsmead concentrated on smaller UK mid-market transactions with a typical maximum equity requirement of GBP5 million. In its new incarnation, FIS Private Equity will target a wider spectrum of mid-market deals, looking at companies in the GBP5 million to GBP50 million value range and aiming to invest GBP1 million to GBP10 million per transaction.
Furthermore, the business will no longer confine itself to the UK market, but plans to use Friends Ivory & Sime’s membership of the Eureko Alliance of European insurers as a route into Continental private equity markets.
Wol Kolade, who was recently promoted to deputy managing director of FIS Private Equity under managing director David Thorp, confirmed FIS Private Equity will also seek third-party mandates for a rolling annual investment plan. Caledonia Investments and other previous Ivory & Sime Baronsmead clients are already on board. Ultimately, FIS Private Equity hopes to match FPLO funds 50:50 with third- party funds, although the initial ratio is in the region of 80:20.
The first step in FIS Private Equity’s expansion programme will be the opening of a regional office in the North of England next year. Thereafter, the group will seek to develop a presence in the European mid-market. FIS Private Equity is well aware that long-term success in the Continental mid-market inevitably involves having a presence “on the ground” in target markets. However, building such a network is an expensive and time-consuming proposition, and the group’s first forays into the Continent will be coordinated out of London. Initially, FIS Private Equity will use the networks and sponsorship of Eureko’s members – Achmea of the Netherlands, Gothaer of Germany, Seguros & Pensoes of Portugal, and Topdanmark and WASA of Scandinavia – to secure market entry and provide credibility, while adopting a rifle-shooting approach to deals.
Wol Kolade said FIS Private Equity expects to invest around GBP30 million in the first 12 months of operation in its new format, with the rate increasing thereafter as the business builds critical mass. Ultimately, FIS Private Equity hopes to win between 1% and 2% of FPLO’s GBP14 billion assets to invest in the UK, Europe and, eventually, worldwide. To achieve this goal, the private equity team will have to provide its new parent with concrete evidence of the “consistent and deliverable returns” it believes are available from the mid-market.