PE firms dole out pink slips

Private equity shops are shedding personnel in an attempt to cut costs in a market marked by fewer investment opportunities and the prospect of shrinking funds.

The Carlyle Group, 3i Group and American Capital (Nasdaq: ACAS) each plan to lay off 100 or more employees in the coming weeks. American already cut 80 staffers in early 2008 and has seen shares of its company drop 90% this year.

“In response to extraordinary market conditions, Carlyle has taken measured steps to balance its cost structure with the current investment climate,” says Carlyle spokesman Chris Ullman. “The firm is well positioned to take good care of our investment portfolio and has the resources to create and respond to compelling investment opportunities.”

The cuts come with office closures, and Silicon Valley is particularly hard hit.

Carlyle is shuttering its office in Menlo Park, Calif., which was opened in January to troll the local region for tech buyouts and growth equity investments. Among the jobless are Managing Directors Nick Sturiale, formerly with Seven Rosen Funds and Greg Rossmann, from Pequot Capital, along with Principal Jeb Miller, from ComVentures, and two other growth equity staffers. Each had served less than two years at the firm.

Worldwide, Carlyle also closed its Warsaw office and cut its Asia leveraged finance team. The cuts comes as the firm recently held an interim close of about $14 billion on Carlyle Partners V (See story, page 6).

About half of the 3i Group’s layoffs will be in its U.K. office, but the firm said last month that it would close its Menlo Park, Calif.-based office by the end of the year. The move has been planned for some time as 3i has been moving out of venture capital.

American Capital said it would close two offices, one of which will be its locale in Palo Alto, Calif., which housed the firm’s technology practice.

The publicly traded firm is not identifying which offices are being shut, but likely candidates for the second closure include Boston and Chicago. American Capital made similar moves earlier this year, closing both its Philadelphia and San Francisco offices.

One industry source says that the Chicago office recently saw some of its most productive deal-makers leave, which makes it a likely target for closing or at least downsizing. Calls to five different investment professionals at the Chicago office were not returned.

New York-based buyout shop Behrman Capital has laid off most of its San Francisco office, and also made a pair of layoffs in its New York headquarters. The middle-market firm declined comment, although Managing Partner Bill Matthes will reportedly stay on board in San Francisco with at least one other investment professional. Meanwhile, another professional from the San Francisco office is relocating to New York.

Behrman raised $1.2 billion for its third fund in 2001, but has been struggling to get anywhere near that level for fund IV, which has so far raised about $137 million, according to Thomson Reuters (publisher of PE Week).

There are, of course, investors losing their jobs. But the majority of the affected employees work in the back-office roles, such as marketing and human resources.

To be sure, not every buyout firm is going through layoffs. Distressed asset firms are thriving in the economic downturn. Sun Capital, a turnaround investor, is hiring. It will add one managing director in Europe after recently hiring a vice president there, according to reports. Sun has had a busy year already, making 23 investments to date.

A spokesman for Apax Partners Worldwide says that the firm is not making any cuts due to current market conditions. Instead, the London-based firm is going through an annual employee assessment program that typically results in about 10% of its staff being let go. The number of fired investment pros is expected to be a bit lighter this year, which means that a bit less than 30 of Apax’s 300 employees will be affected. Some investment staff and back-office cuts have already occurred in New York, where Apax currently has 67 employees.

The spokesman declined to say if all empty positions would be refilled, but did say that Apax plans to hire three senior associates in New York and either three or four senior associates in Europe.

Apax raised more than $15 billion for its seventh European buyout fund, which closed last year.