Sources have confirmed that Texas-based buyout giant Hicks, Muse, Tate & Furst has published a revised private placement memorandum for its follow-up European fund, setting a EURO1 billion ($1.2 billion) target for its second vehicle dedicated to Europe.
Symbolic of the stingy fundraising environment these days, the anticipated mark-if met-would fall short of Hicks Muse’s inaugural European fund, HMTF Europe Fund I, which closed on $1.5 billion in 1999. Through the first fund, Hicks Muse made investments in Seagram’s French champagne houses Mumm and Perrier-Jouet, which it sold for a profit to Allied Domecq in 2000, and earlier this year the firm, along with co-investor Apax Partners, floated Yell Group in an IPO that brought back a roughly two times return on equity. (That deal also won Buyouts 2001 European Deal of the Year.)
However, even with a resume like that of Hicks Muse, the fund faces a challenging market. Since 2000, when U.S. buyout funds raised $63.31 billion, the numbers have fallen off dramatically, down 73% to $17 billion in funds raised last year. And so far 2003 hasn’t looked much better, accumulating just $6.85 billion in the first three quarters.
To mitigate this, Hicks Muse has made an effort to construct a more investor-oriented fund with terms that better align the interests of the general partners with their investors. The PPM reportedly stipulates that 80% of the acquisition and monitoring fees Hicks Muse generates from investments will be shared with investors, versus 50% in earlier funds, and investors will also share 100% of the break-up fees.
One limited partner told Buyouts, “You’re clearly starting to see that the market is more LP friendly, and this is an example of that.”
Ostensibly, the decision to ease the terms of their second European fund is likely designed to give Hicks Muse a leg up over its competitors. Other buyout firms on the fundraising trail for a European fund include a number of homegrown shops, such as 3i Group, Industri Kapital, Doughty Hanson and Terra Firma.
Past investors in Hicks Muse funds include Black & Decker Corp., CIGNA Private Equities Inc., Hunt Securities, Michigan State Treasury, Ohio National Life Insurance Co., The Prudential Securities Group, Swiss American Corp. and Wabash Life Insurance Co. For this latest effort, Hicks Muse has also signed on Citigroup as a placement agent. For its previous fund it used Helix Associates.
Hicks Muse declined to comment for this story.