A new UK lower mid-market focused private equity firm,
Jonathan Kaye and Derek Elliott, former senior executives at Permira, and Kevin Street, who left his position as director at CVC Capital Partners last November, have hired Harjinder Hatfield, previously at GIC Special Investments, to raise an additional £200m from other limited partners.
“My two fellow partners were put in touch with Lord Rothschild about a year ago at a time when he was looking to formalise his private equity investments,” said Kaye. “They wanted to set up their own fund, so it was a meeting of minds.”
Rothschild has also recently backed two other private equity ventures: former Apax Partners founder Sir Ronald Cohen’s alternative asset management business Portland Capital; and Aurigo Management, a distressed-focused private equity firm founded by turnaround specialist Archie Norman.
Lord Rothschild said in a statement: “RIT has a long and successful track record of identifying and backing talented investment managers. The three partners of Darwin are an experienced private equity team with an outstanding track record.”
The fundraising will predominantly focus on a select band of UK institutional investors and family offices, said Kaye.
“Being focused at the smaller end of the UK market means that we don’t meet everyone’s criteria, so we want to get a small group of quality investors who are focused the same way as us, who will support us in this and our future investments in the UK lower mid-market,” he said.
“We will focus on UK investors and see some Europeans, but we have also had some interest from North America and Canada. In addition, because of Lord Rothschild, who is so well connected, we will probably see more family offices as well.”
Kaye was at CVC Capital Partners from 1999, the same year Elliott joined Permira. Street joined the London-based buyout firm in 2000. At CVC, Kaye worked on a number of consumer and financial services transactions, including Kwik Fit, Homebase, Formula One and Collins Stewart.
Kaye said that Darwin would be essentially opportunistic in terms of investment strategy, but that the firm would focus on areas where the partners have prior experience: consumer; industrial products, financial services and TMT.
Despite the size of their respective former employers, Kaye said that Darwin would pursue opportunities in the lower mid-market.
“We think there is a space in the lower mid-market for a high quality team to enter,” he said. “We have developed our investment approach at two of the leading firms, working alongside some of the most talented people in the industry.
“Our aim is to bring this expertise to a less sophisticated part of the UK market. It’s very easy to forget where CVC and Permira came from – 10 years ago, they were doing the kinds of deals Darwin will do today, and have moved from the lower mid-market to mega buyouts.”
In total, the three partners have been involved in more than 40 transactions in the past seven years, including a significant number in the UK lower mid-market. Darwin will target buyouts of up to £150m (€220m), with its main focus on investments in the £50m to £100m range.
The company’s name, added Kaye, has two connotations. “In order to be successful, you need to be different, and Darwin is one of history’s great contrarian thinkers; and we also liked the connotation of helping the business we will invest in evolve and move on to the next stage,” he said.