As the most breathless year for private equity fundraising draws to a close, a clearer picture of the likely runners and riders is starting to emerge for 2006. Permira will top the bill, when it launches the largest-ever European private equity fund at €8bn.
The UK-based buyout house, which held a final close on its last fund at a shade over €5bn in October 2003, has timed its run well. It will avoid major European competitors such as CVC Capital, BC Partners, Candover and PAI Partners, as well as US groups Carlyle, KKR and Blackstone, all of which have rounded off dedicated European or global fundraisings this year.
While Permira enjoys an exceptional reputation among investors, one concern is its ability and track record at the top end of the market, because it has posted most of its returns as a mid-market house. This is unlikely to deter investors hungry for exposure to private equity, however, and most would expect Permira to hit even this ambitious target fairly easily.
Permira will not have the mega-market exclusively to itself. Cinven, which closed its last fund in July 2002 at €4.4bn, will launch its fourth fund in the first quarter of 2006. It is expected to target between €5bn and €6bn, with LPs already reporting that the vehicle is likely to be well oversubscribed
Nordic Capital, which held a final close on its fifth fund at €1.5bn in April 2003, is already marketing a €1.7bn successor vehicle to investors. That is also reported as being significantly oversubscribed.
In the mid-market, Duke Street Capital will be testing the institutional water in the first quarter after the departure of Eddie Truell earlier this year. The UK-based buyout group is thought to be largely sticking to its guns, aiming to raise a vehicle in the €850m to €1bn space.
German buyout firm Deutsche Beteiligungs has also recently announced the launch of its latest fund, DBAG Fund V, which is set to raise €375m in the next few months. When the group closed its last fund on €228m in September 2003, three-quarters of commitments came from German investors. International investors were reluctant to commit investments to German funds because of their general pessimism regarding Germany’s economic outlook at the time. DBAG said that in the last two years there had been a significant uplift in international investment as general confidence in Germany’s economy increased
Doughty Hanson and 3i will be interesting cases. Both were pilloried during previous large fundraising efforts, but have since enjoyed a significant reversal in their fortunes.
3i is understood to be in the early pre-marketing phase for a €3bn valued fund, which is due to be launched officially early in the new year. The UK-based group has had an exceptional time under the stewardship of Jonathan Russell. Since January 2001, it has invested €2.5bn, returning €1.8bn to investors for a realised IRR of 63%, with the unrealised investments representing a 40% IRR at NAV. According to Russell, 64% of the realised value can be accounted for by Ebitda growth in the underlying portfolio.
Doughty Hanson, which only formerly closed its last private equity fund in 2004, is thought to be coming back to the market in 2006, targeting at least €2bn. The group, which was criticised for raising its last fund before distributing adequate capital to its investors, subsequently lost momentum, but it could yet have the last laugh. By calling the market and refusing to be pushed into making exits, it has benefited from significantly increased valuations in the last year. It has distributed €5bn to its investors in the last 12 months through a string of exits including the IPOs of Saft and RHM.