Private equity returns up

European private equity returns reached 11.7% in 2007, up from the 10.8% of 2006, according to preliminary data from the European Venture Capital Association (EVCA) and Thomson Financial.

The figures, which are net of management fees and carried interest, saw buyouts return 16.1% and venture capital 4.5%.

Top quarter buyout funds produced pooled IRRs of 33.4%, with venture fund making 15%, and all top quarter private equity funds achieving 23.5%.

The preliminary statistics – produced by the EVCA in conjunction with PEREP_Analytics – also reveal the industry raised €74.3bn in 2007, down from the previous year’s figure of €112bn. More than one half of all capital raised was concentrated in 13 plus €1bn funds. Pension funds provided a total of 25.3% of capital for private equity, a small decrease on the 27.1% in 2006.

Around 120 independent funds reached final close last year, with an average fund size of €560m. This number falls to €246m when the cumulative amount raised by the €1bn plus funds is taken out.

Investment in 2007 looks likely to exceed the previous year’s tally of €71bn, with the early data likely to exceed the current €68.3bn. Divestments totalled €23.1bn.

The final figures of 2007 will be published at the EVCA Symposium in June.


Darling delivers maiden Budget

UK Chancellor Alastair Darling delivered his first Budget, in which he confirmed plans to scrap taper relief and increase capital gains tax by 80% by introducing a flat rate capital gains tax rate of 18%. Small business owners are granted a concession in the form of the so-called ‘entrepreneur’s relief’, whereby a selling owner will be given a 10% tax cut up to the first £1m of lifetime capital gains. The Chancellor has also pressed ahead with his £30,000 levy on non-domiciles.

SMEs also look set to benefit from the appointment of industry veteran and Amadeus Capital CEO Anne Glover to lead a review into how private companies can gain better access to government contracts. Darling’s aim is for 30% of all public procurement to come from SMEs by 2013.

Other announcements included the increase of tax relief for companies in the Enterprise Investment Scheme by £100,000 to £500,000, and tax relief for employees under the Enterprise Management Incentive Scheme, which goes up from £100,000 to £120,000. Also, a £12m fund has been set-up to back female entrepreneurs, and the Chancellor has also pumped in an extra £60m in funds to the Small Firms Loan Guarantee scheme.


Largest LBO since credit crunch launches

Abbot Group, a UK based oil field services company, has launched its £1bn credit facilities in what is the largest LBO since the summer’s credit crunch. It’s success, or otherwise, will be seen as a barometer for the rest of the year. US private equity firm First Abbot is a Scottish-headquartered oil field services group that owns and operates onshore and offshore drilling rigs and provides drilling services to third parties. It operates in Europe, the Middle East, Russia, North and West Africa, and the Caspian Region. First Reserve is the largest private equity investor in the energy industry with over US$12.5bn under management. The firm claims the deal will be the largest private equity buyout in the drilling services industry, and the first and largest European oil field services take-private.

Will Honeybourne, managing director of First Reserve, said: “Long-term industry demand, based on global needs for increased oil production over the medium to long term, makes Abbot an attractive acquisition for First Reserve.”


Carlyle breaks French record

US buyouts giant The Carlyle Group has acquired a 37.8% stake in French telecom companies Numericable and Completel, from existing shareholders Altice and Cinven. The €1.1bn equity investment has given the companies an aggregate enterprise value of €6.5bn. The equity investment is the largest ever made by a single private equity firm in France.

Numericable operates the leading alternative high speed network in France, covering close to 10 million households and providing high definition television, video on demand, very high speed internet and telephony services. Numericable is the first operator to have massively deployed its own fiber network in France. This fiber network already passes over 2 million households and will be extended to 8 million households by 2010. Completel offers differentiated services to corporate customers using the largest alternative metropolitan fiber access network and the third largest DSL network in France.

Benoît Colas, managing director at Carlyle, said: “Carlyle’s financial strength and depth of experience, gained from numerous investments including Casema, Com Hem, UPC Sweden and Bredbandsbolaget in Europe will enable us to be strong partner to management and existing shareholders Altice and Cinven in progressing the companies’ development.”


La Caixa hunting for private equity managers

Spanish banking group La Caixa is looking to commit 10% of its €3.8bn pension scheme to alternative assets.

Speaking to EVCJ sister publication Thomson Investment Management News, chairman of the scheme’s trustees, Antonio Canals Coll said that the seven-year old defined contribution scheme has a structure whereby 52% of its assets are in bonds, 38% in equity, and the rest goes to private equity, commodities, hedge funds and real estate in equal measure.

It is currently in hiring mode and is looking for private equity, hedge fund and real estate fund managers. It has hired Mercer as consultant on the process.

Canals Coll told Thomson IM News that about half of private equity’s 2.5% share of the alternatives allocation is invested in funds of funds, the rest is invested in mutual funds and shares of listed private equity funds.


Ferd rebrands as Herkules

Ferd Private Equity, the Norwegian private equity firm, has renamed itself Herkules Capital following its spin out from parent Ferd.

Ferd has been the largest investor in the firm since it was established in 2004, although the two have operated independently. CEO of Ferd Johan H. Andresen said: “Ferd was the originator and founder and has been a solid contributor to this investment firm – which has provided excellent returns for everyone involved.”

Herkules has NOK6.25bn (€776m) of capital under management, and is led by managing partner Gert W. Munthe. Herkules currently consists of two funds, which have invested in small and medium enterprises in the Nordic region, primarily in Norway. In total, Herkules has invested in 33 companies with combined annual revenues of NOK18.6bn.

The firm’s last fund, Ferd Private Equity Fund II, raised NOK4.25bn in October 2006. It received commitments from Goldman Sachs, Standard Life, AGF, Third Swedish National Pension Fund as well as leading Norwegian financial institutions such as Ferd, Orkla, Storebrand Livsforsikring, Vital and Aker Kværners Pension Fund.


Renaissance smashes US$500m PE target

Russian investment bank Renaissance Capital has raised a US$660m maiden private equity fund for companies in Russia and the former Soviet Union. The fund exceeded its US$500m target as a result of investor demand, with Renaissance itself committing 40%. Other investors include institutional investors, funds of funds, and family trusts.

Renaissance was founded in 1995 in Moscow, and is now one of the leading investors in emerging markets, with a presence in Sub-Saharan Africa and the Middle East as well as Russia and the CIS. The firm also offers its clients access to these markets through offices in London and New York.

In other Russian private equity news, Altimo, the telecoms arm of Russian private equity firm Alfa, had launched a €639.5m lawsuit against Norway’s Telenor on the grounds that it has delayed Vimpelcom‘s entry into the Ukrainian market. Vimpelcom is Russia’s second largest mobile phone operator and jointly owned by Alfa and Telenor.