New strategy for ABN AMRO Capital

ABN AMRO Capital is changing the focus of its private equity business to concentrate on larger mid-market buyouts – namely up to e500 million enterprise value or a minimum equity commitment of e25 million. This, says Gerben Kuyper, head of ABN AMRO Capital’s global private equity operations, should keep the bank away from the auction market. It is also preparing the ground to raise external funds once it has established a track record in the mid-market, probably a fund in the region of e500 million to e1 billion. Currently ABN AMRO Capital has e2.3 billion in proprietary investments on its books and a further e600 million of funds under third party management, which are able to co-invest in ABN AMRO Capital’s proprietary deal flow.

This new strategy follows on the heels of ABN AMRO’s wholesale banking business, which announced in August last year that it intended to focus primarily on its European clients. The private equity division of ABN AMRO will stay with that focus. Private equity operations in the US, based in Chicago, move to a portfolio maintenance footing – there are around 25 to 30 investments that need managing. No new investments are envisaged in the US, says Kuyper, unless part of a strategic acquisition for a European-based investment. The bank’s private equity operations elsewhere outside Europe – namely Brazil and Australia will, in the case of the former, conduct business as usual whereas the Australian business will focus more on the MBO market as well as development capital. Brazil, in contrast, is very much a local operation linked into its domestic mid-market.

Also, Kuyper says e-commerce investment activity within the bank has been shelved and investment in TMT and ICT sectors scaled back. These two sectors currently account for around 10 per cent of the bank’s private equity investment portfolio, although any new investments in these areas will be predicated on a need within an existing European portfolio company.

Towards the end of 1999 ABN AMRO Capital lured Ian Taylor away from the London office of Legal & General Ventures, where he had spent the previous ten years and in so doing got itself an experience larger mid-market buyout deal doer with an emphasis on buy and builds. Kuyper is keen for Taylor to build on his existing work in London, which has so far seen bids for Perkins Foods (successful) and WH Smith’s (withdrew), since he points out that 50 per cent of the total activity in the market segment ABN AMRO Capital is now targeting emanates from the UK. UK investments presently account for 15 per cent of the bank’s private equity portfolio.

It wasn’t all plain sailing for the UK team last year, aside from the public-to-private of WH Smith falling, having gained exclusivity on the Hunting Engineering transaction it took six months – held up with regulatory issues – before the deal could complete. Taylor, who runs the largest team, has six investment professionals working on deals valued at under GBP100 million and a further four on deals worth in excess of GBP100 million up to approximately GBP500 million. At present the other offices have not separated out their teams but, as is to be expected, some individuals tend to be associated with the larger transactions.

Other key players following the new strategy include Marc Staal, head of pan-European Buyouts, Herve Claquin, head of the French team (and chairman of the European Venture Capital Association’s professional standards & communications committee), Bob Kramer, head of the Dutch team, and Wouter van der Veen, head of the venture capital team. The UK, France, Germany, Benelux, Italy and Spain are priority target markets going forward.

Kuyper, Taylor, Staal, Claquin and van der Veen hold a tele-meeting every Monday morning ensuring, among other things, that the team works as a unit. That unit is able to invest e1 billion from ABN AMRO’s balance sheet in 2002 and a similar figure is anticipated during 2003 and 2004. Also drawing on this capacity will be a team in Madrid and Milan by the end of 2002.

ABN AMROCapital’s investments include; the GBP27 million buyouts of Stephen Nau, the German manufacturer of solar water heating systems and of UK-based Hunting Engineering (GBP59 million) and the public to private buyouts of Perkins Foods, the UK-based chilled and frozen foods group for e296 million, and De Dietrich at Cie, the French manufacturer of railroad equipment for e400 million.

Goodbye to mezz

ABN AMRO Mezzanine is shutting up shop after five years in the business. John Sealey will manage the portfolio and eventually transition into ABN AMRO’s private equity division within the UK headed by Ian Taylor. The mezzanine team comprised Barrie Moore (managing director), John Sealey (director) and Tina Sharp (director.) The trio joined ABN AMRO Mezzanine in 1996, when the unit was set up, having recently departed NatWest Ventures. Moore was a director of NatWest Ventures and head of mezzanine finance at NatWest Markets. Sealey was assistant director of NatWest Mezzanine Finance and had previously worked within NatWest Markets Acquisition Finance team. Sharp was an assistant director of NatWest Ventures and an associate director of NatWest Markets Mezzanine Finance. The team had invested some GBP150 million during their time at ABN AMRO Mezzanine. Investments include Blue Boar Motorway Services, Mayfair Taverns, McLaren, Pilkington Tiles, Salt Union, Swedish Match, Club 18-30, Avocet Hardware plc.

Tina Sharp joins an ABN AMRO Mezzanine portfolio company, Sanctuary Group, on a part time basis as director of treasury and investments. Barrie Moore is also leaving ABN AMRO Mezzanine.