Standard Life Investments, which manages the assets of British insurance giant Standard Life Assurance Co., has closed European Strategic Partners II (ESP II) with a total of $1.37 billion. The Edinburgh-based fund-of-funds is 26% larger than European Strategic Partners, the firm’s last European fund-of-funds that closed in 1999 with approximately $1 billion. ESP II has earmarked $1.07 billion for investment into private equity funds and $302 million for direct investments in companies.
The fund brings Standard Life Investments’ private equity funds under management to more than $3 billion, which represents an increase of 37% in 2003, according to Jonny Maxwell, the chief executive of Standard Life Investments (Private Equity) Ltd. The fund will focus on European buyout funds with special attention paid to the U.K., mid-market buyout sector and larger Western European buyout funds. ESP II will commit five percent of the fund, at most, to venture capital. The company’s main investment focus is on management buyouts and expansion capital with an average total transaction size of between $63 million and $505 million.
Seventy percent of ESP II was raised from new investors. The fund has Asian, European, North American, Middle Eastern as well as U.K.-based limited partners. North American investors account for 30% of the capital raised in the new fund. State and local pension funds comprise the majority of the fund’s North American capital.
“We focus on mid-market buyouts and have stuck to our knitting,” said Maxwell. The fund had a first close in October 2002, and while it’s taken a long time to raise, any such close is a success in the current fund-raising environment. “We’ve been marketing longer than we had hoped, but in a market where we’ve seen people sold and fold we’re happy to have done this,” he added.
Maxwell sees the European buyouts market as staying healthy and expects more exits in 2004 than in previous years. “I think we’ll see more activity coming through as people have had these companies long enough,” he says. “We’ve also seen an increase in the number of realizations coming through. I think the increase in financial sales will continue. I think we’ll see a continued divestment of non-core assets from corporations.”
The funds had already committed more than $251 million to private equity funds including the Barclays Private Equity European Fund, Charterhouse Capital Partners VII, Graphite Capital VI, the Italian Private Equity Fund IV, and Permira Europe III.
The fund has also committed more than $50 million to direct investments. It invested $12.6 million in ONV Topco, a provider of personal hygiene products along with Candover. The fund also invested $19 million into both Scandinavian construction supplier Danske Traelast and U.K. retail company Debenhams.