EVCJ is born
The UK Venture Capital Journal, the forerunner of EVCJ, is launched by Venture Economics Ltd and edited by Susan Lloyd, who went on to found placement agents Susan Lloyd & Associates. The inaugural issue included a handy definition of venture capital, as well as news on the founding of the British Venture Capital Association and a piece on the then Chancellor’s Sir Geoffrey Howe’s latest budget, which received a positive reception at the time with its tax relief for the funding of MBOs. The European Venture Capital Association also debuted the same year.
Finance for Industry becomes 3i
The Finance for Industry group changes its name to Investors in Industry, or 3i for short, under the leadership of CEO Jon Foulds. 3i has its roots in 1945 with the establishment of two bodies – the Industrial Commercial Finance Corporation and the Finance Corporation Industry – to provide funding for independent UK businesses. The two merged in 1974 to become Finance for Industry.
Cohen takes up position at Apax
The firm that would go on to become the behemoth Apax Partners closes its second fund, a venture capital one of all things, on £25m – Apax gave up on venture capital officially in 2006. Alan Patricof Associates, as it was known then, appointed Sir Ronald Cohen as chairman in 1984, a position the former McKinsey & Company man held until 2005.
By way of some comparison between 1984 and now, Apax’s last fund raised €11.2bn, currently the largest private equity fund in Europe.
Private equity goes public
A taste of things to come as Candover, one of the first specialist buyout houses in the UK, goes public on the London Stock Exchange, four years after the group was founded. At the time of IPO, shares in the firm were offered at 160p each, giving it a market capitalisation of £11.45m. At time of writing (early January), these figures for Candover Investments plc stand at 1776p per share with a market valuation of £385.77m.
Two and a half years later the firm became one of the first pan-European private equity houses when it opened an office in West Germany as it was then, Frankfurt to be precise, which closed in 1995. Candover returned in 2002, this time with an office in Dusseldorf.
First buyout fund for the UK launched
Schroder Ventures becomes the first private equity investor to raise a dedicated UK buyout fund. Schroders spent much of the 1980s trying to crack the European private equity market and set up a number of teams throughout Europe: in 1986 it set up an advisory team in Germany, it raised an Italian fund in 1987, and raised a French one in 1989. In the mid-1990s these businesses were unified under the Schroder Ventures Europe brand, and in 1997 it raised Europe’s first US$1bn private equity fund, before raising €3.5bn for its second fund in 2000. The following year Schroders Ventures Europe spun out of its parent and renamed itself Permira. The firm’s last fund raised just over €11bn.
Israel gets first venture fund
The Israeli venture capital market is born with the creation of Athena Venture Partners. A US/Israeli firm, it raised US$25m for its first fund, led by founding partner Gideon Tolkowsky. He was joined two years later by Yadin Kaufman, who together would go on to found Israel’s second VC firm, Veritas Venture Partners, in 1990, of which Athena would become an affiliate before eventually winding down in 1997. Kaufman remains as top dog at Veritas, whilst Tolkowsky is currently the managing director of BME Capital Management, a Tel Aviv-headquartered investor in early stage, cutting edge medical device projects.
Stats the way I like it
Data gurus CMBOR founded. The Centre for Management Buyout Research was founded at the Nottingham University Business School by Barclays Private Equity Limited and Deloitte and has since established itself as one of the foremost producers of statistics about the UK and European buyouts market. It is headed by Professor Mike Wright and Andrew Burrows who run a team of five, maintaining a database of over 25,000 companies and producing regular research notes and analysis on trends in the buyouts industry (with and without private equity funding).
Private equity comes to Spain
Mercapital opens its doors to become Spain’s first private equity house. Founded by José María Loizaga Viguri, now chairman of the firm, it started out as a merchant bank before making private equity investments the following year. In 1991 it decided to concentrate solely on private equity. It closed its last fund, the €550m SBF III, in November 2006 and has now invested a total of over €1.4bn of equity since its establishment. The firm is currently headed by executive partner and EVCA chairman from 2006 to 2007, Javier Loizaga Jiménez.
Barings takes buyouts plunge
BC Partners founded as the private equity arm of Barings Bank. It achieved independence from the bank in 1995 following an MBO and now has five offices in Europe and one in New York, where it recently announced plans to expand as it looks to increase its investment activity in the US. Since 1986, the firm has invested in 65 companies with a total enterprise value of €49bn, and raised €5.8bn for its last fund in 2005. The firm recently lost its UK head, Simon Palley, who had been the longest serving member at BC Partners until his resignation in September to pursue other interests. The firm’s three founders left in 2001 and 2005.
That’s life (science)
Abingworth, the US/UK venture firm, abandons technology investments to focus purely on biotech. The firm’s business dates back to 1973, when Abingworth Limited was established in London as a self-managed venture capital fund investing in technology companies in the UK and US. Abingworth Management Limited was formed in 1981 to provide ongoing management of Abingworth Limited whilst at the same time raising and managing other funds. From 1987 onwards these have been in life science and to date the firm has invested in over 100 companies and currently has US$1.25bn under management.
Sofinnova ventures forward
French VC Sofinnova Partners raises its first independent fund. The firm, which was founded in 1972, floated on the Paris Stock Exchange in 1986. Sofinnova Capital I raised 29.6m in ECUs – the forerunner to the Euro – or 207m French Francs in old money – which equates to around €38m today. It was the first time Sofinnova had raised a fund from foreign investors, which accounted for 6% of the total. Today the firm manages €900m in assets through five funds, the last of which closed in January 2005 on €385m.
CVC goes it alone
Banking giant Citigroup spins out its venture capital arm, which is renamed CVC Capital Partners. Founded in 1981, this move saw it become an independent unit owned by its manager and free from certain US banking regulations which had restricted its operations. Already one of the top buyout firms in Europe in 1993, it has since gone on to raise a total of US$29bn in funds and has 18 offices spread across the globe. Since 1981 it has made over 250 investments. CVC closed its last fund in 2005, raising €6bn.
3i goes public on the London Stock Exchange. Valued at £1.5bn at the time, it is now the biggest listed private equity company in Europe, with a market capitalisation of £3.87bn. It wasn’t the first private equity firm in Europe to explore the public markets – that honour surely goes to the Electra Investment Trust – and it wasn’t the last, but firms and funds going public hit the headlines 12 years later when KKR floated a fund in Amsterdam and the industry was swept up in a torrent of discussion about which mega fund would be the next to take the plunge before reality struck and everybody realised it wasn’t quite as easy as it looked.
KKR comes to town
At the time arguably the most famous LBO firm in the world following the RJR Nabisco takeover five years previously, KKR sets up in London under the guise of Glenisla, which was headed up by Ian Martin, the deputy chairman of the food and drinks group Grand Metropolitan. Glenisla was charged with investing in deals with a value of £300m or more in Western Europe. It was rebranded as KKR Europe in 1998, and is today headed up by Johannes Huth, who has been in the job since 2004. The firm has invested US$4.5bn of equity in Europe to date, and currently has a portfolio of 10 companies.
Taper relief introduced
The BVCA scores a victory when the UK Government announces it is to introduce taper relief on capital gains tax. In its 1994 tax submission report the BVCA argued such a relief would encourage long-term investment and even that it may result in an increase in government revenues. Taper relief was not introduced until 1998, when it was announced that gains on business assets held for 10 years or more would be taxed at 10% or less. There have been a number of changes since then, such as the reduction of the 10-year period to five, but the most significant change is still to come, assuming the current Chancellor decides not to bow to pressure and abandon his decision to effectively scrap taper relief and increase capital gains tax by 80%.
London takes AIM
AIM’s success since 1995 was completely unpredicted. Launched as a generic growth market, it was expected to offer an alternative route to funding for smaller UK companies, and this is exactly what it has done, along with so much more. Now AIM is one of the leading public markets in the world. Since 1995 over 2,500 companies have listed, raising £34bn in the process, attracting companies from around the globe – in the final quarter of 2007, the main market saw 10 non-European IPOs, AIM saw 22, raising a total of €644m. The market has its fair share of critics, who argue it is too easy to list and that it is too reliant on oil & gas companies – a direct consequence of AIM’s success – but there can be little doubt that the market has far exceeded 1995 expectations.
Index raises first fund
One of the most successful venture capital houses in Europe, Index Ventures started out as ‘Index Securities’, an institutional eurobond broker based in Geneva. Founded by Gerald Rimer, it remained a brokerage until 1992 when Rimer’s son, Neil, persuaded his father to concentrate on investing in technology companies. It raised a pilot fund in 1996, raising around US$17m, before launching its first proper fund in 1998, raising US$180m the following year.
Carlyle raises European fund
Carlyle, which opened offices in London, Paris, Munich and Milan in 1997, closes its first European fund on US$1.1bn. Despite KKR coming over from the US four years earlier, Carlyle’s first-ever dedicated European fund was supposed to light the blue touch paper for the American invasion in the late 1990s, but it didn’t quite pan out that way. Other US firms were eager to open offices in London but less keen to set up European-specific funds. Some, like Hicks, Muse, Tate & Furst, followed suit, later spinning out and becoming Lion Capital, but despite much hype at the time, it was a small minority of US houses who decided to make such a high level of commitment to private equity.
Doughty leads British invasion
In the other direction, UK buyouts giant Doughty Hanson opens a New York office, which made its first investment in June of that year in Knowles Electronics, a maker of hearing aid components. Since then, a number of other European firms have made the same trip from these shores to the US – Permira opened a New York office in 2002, CVC and 3i Growth Capital in early 2007, and BC Partners added its name to the list by setting up an office last year and is currently scouring the US to build the team.
Dot.com becomes dot.bomb
It was the burst that was heard around the world, and things for venture capital would never be the same. For a while back in the late 1990s, the Internet looked like it was a bottomless gold mine. As the Internet went from being the province of governments and Internet geeks to a worldwide web of information and entertainment, changing the way people live, work and shop, it was difficult to move without bumping into someone who was working, or setting-up, an Internet company, and practically impossible to pick up a newspaper without reading something about dot.coms. VCs piled into the sector as stock market valuations for such businesses sky-rocketed but by the end of 2000, it was clear the good times were over – NASDAQ was plummeting and dot.coms were disappearing as fast as VCs were losing money. A lot of venture capitalists and their investors got badly burnt by the dot.com bubble burst, and it’s taken most of the Naughties for the asset class to recover, especially in Europe, whose nascent VC industry was just beginning to achieve a head of steam before the virtual world came crashing down.
Private equity backlash starts here
In September, the UK buyouts giant Permira acquired AA in one of the largest deals of the time. Buying a “brand name” for €2.7bn was always going to attract a fair bit of attention, but unfortunately it was also the deal which would become the lightning rod for the anti-private equity lobby. Permira, alongside CVC, acquired the AA from Centrica. In October of the same year, the company announced it was cutting 1,300 jobs across the UK, representing 10% of its workforce. Since then around 10,000 have gone. It was this that led to the first public salvo aimed at the buyouts industry: trade unions GMB protesting outside CEO Damon Buffini’s Sunday prayers at Holy Trinity church in Clapham. This catapulted private equity onto the front pages and into the minds of trade unionists and politicians across the country.
Skype, a Luxembourg-based Internet communications company that allows users to make free phone calls over the Internet, is bought by US online auctioneers eBay in a deal worth a total of €3.3bn, and although this amount was later reduced by almost a €1bn, Skype’s VC backers Bessemer Venture Partners, DFJ and Europe’s Index Ventures still made a considerable return, more than enough to place Skype in the hall of European VC legendary sales. Arguably Europe’s first home-run exit, no-one could quite understand why eBay was willing to pay so much for a voice over Internet company – and no-one still does. But that didn’t matter to the VCs involved or to the remainder of the European venture community who have dined out on the Skype success story ever since, using it as an example of what can be achieved in European venture capital (even if most of the capital was from the US).
In the spotlight
The Treasury Select Committee hearings were the climax of a year-long attack on private equity by assorted trade unionists and politicians – not to mention “the enemy within”, personified by SVG Capital’s Nick Ferguson and the legendary cleaners comment. Never before had private equity been exposed to such scrutiny than when some of its leading lights fell under the uncompromising glare of committee leader John McFall. It started with a spectacular bang – the immediate resignation of BVCA CEO Peter Linthwaite after a grilling in the first session. After that, it was a bit of a damp squib, despite Jon Moulton’s best efforts, with the committee getting obsessed with the minutia of cov-lite loans and other debt-related intricacies, and since the hearings the financial world, and in particular private equity, has had something much more important to worry about…
… the Credit Crunch. It was quite a year for private equity, encompassing everything from being pariah number one, to raising funds with sizes unthinkable even a few years ago, to continually breaking investment records, it seemed as if the industry was unstoppable. And then it was all over. Over-exposure to the US sub-prime market, a rather obscure, if popular, niche of the financial markets, pinched the world economy and the investment banks cried. Suddenly, from falling over themselves to underwrite LBO debt, the banks closed their doors and pulled down their shutters to all but a fraction of deals. New deals weren’t getting done and deals already out there, like EMI or Boots, were struggling badly and banks could not shift the paper. Things improved slightly after the summer, but then tightened again as the year drew to a close, and if reports are to be believed, 2008 is even worse. The golden days of private equity are finally at an end.
Private no more
After a year which saw private equity thrust into the limelight, demands for less secrecy and more transparency were finally answered in November when former Morgan Stanley chairman Sir David Walker released his highly anticipated report. A positive step towards openness and disclosure, it didn’t go far enough for some of its critics who called it “wimpish” and despaired at the notion that the industry should regulate itself through an independent guideline review and monitoring group created by the BVCA. Much to the chagrin of trade unions and several politicians, the Walker Code is only voluntary and applies to large private equity-backed companies, who are required to include details of their private equity owners in its annual report, and publish a mid-year update giving a brief account of major development in the organisation. Like it or not, the publication of the report was a true landmark in the development of private equity in the UK.