Vision Capital secures E1bn

Vision Capital, a buyer of direct private equity portfolio assets, is eyeing a potential pool of €1bn for future investments. The new investment programme comprises a €350m committed core fund, Vision Capital Partners VI LP, which is expandable through a series of parallel investment vehicles that offer an additional funding capacity to reach a final programme size of €1bn. The fund structure will allow for the efficient execution of transactions of varying size and diversification (from €20m to in excess of €500m of equity), reflecting the differing numbers and sizes of companies in the private equity portfolios the firm is targeting. Angela Sormani reports.

The Vision Capital team, headquartered in London, focuses on acquiring predominantly European portfolios of direct private equity investments from private equity firms and other investors. These transactions enable private equity firms to realise value from an entire fund or portfolio in a short time frame, without having to sell their interests in the portfolio companies on an individual basis.

Julian Mash, chief executive of Vision Capital, explains the strategy behind the fundraising. “The fundraising model is designed to ensure flexibility to the group. The key driver is our business model, which has a huge variation in transaction size. The core pool will help us be more efficient when acquiring smaller portfolios and that size (€350m) was decided upon by the estimated size of our deal flow at the time.” He goes on to explain that larger transactions will be part funded by the core fund and topped up by a parallel investment vehicle.

Leading international institutions have committed to the programme, which was significantly oversubscribed. Long standing partners (including Goldman Sachs Asset Management, which remains the largest) have substantially increased their support, and approximately 20% of the fund has been provided by new investors. Other investors include Landmark Partners, Pantheon Ventures, AIG SunAmerica, Adams Street Partners, Harbourvest, Pomona Capital, Unigestion, Bank of Scotland and Graphite Enterprise Trust.

Vision Capital’s increased funding capacity will allow the firm to capitalise on an anticipated increase in deal flow and market demand. Direct portfolio transactions offer private equity and other investors the opportunity to realise significant value from all or part of their non-core investment portfolios in an efficient, timely and flexible manner, compared with individual disposals. Mash says: “This is a significant milestone for Vision Capital, providing us with additional firepower to deliver high quality realisations for our private equity counterparties, with enhanced delivery and no loss of flexibility. It anticipates increased investment volume during the next phase of our development. We highly value the increased support of our existing investors and welcome our new investors to the programme.”

Since inception, Vision Capital has completed three direct portfolio acquisitions from Deutsche Bank, Credit Suisse and Legal & General, committing €375m of equity in the last three years.

Vision Capital’s first, landmark transaction was the Morgan Grenfell Equity Partners’ (MGEP) portfolio it acquired in 2003. The portfolio represented the majority of the investments held by MGEP and included interests in Deloro Stellite Group Limited (sold to Duke Street Capital in early 2006), Abrasive Technologies Holding AG (renamed Wintherthur Technologie and floated on the Zurich Stock Exchange in July 2005), AB Cerbo Group and Shearings Group Limited (sold to Wallace Arnold, a 3i-backed company, in February 2005.) The transaction was financed by lead investor Goldman Sachs’ GS Vintage Funds II, a series of investment partnerships managed by Goldman Sachs Asset Management’s Private Equity Group.

The following year, Vision Capital completed

the acquisition of the investment portfolio of CS Structured Credit Fund Limited. The five investments in

this portfolio comprised controlling stakes in: Avebury Taverns, which owned over 700 UK tenanted pubs

and was sold to Punch Taverns in August 2005; Elegant Hotels Group, owner and operator of five luxury

hotels in Barbados; as well as interests in Cabot Financial, a purchaser of under-performing consumer debt, alongside Barclays Private Equity, which was sold to Nikko Principal finance in April 2006; RoadChef, an operator of motorway service areas in the UK; and Resource Partners Group, a finance company for providers of services to the UK public sector. The portfolio of companies was acquired by an investment partnership with £100m of committed capital, established and managed by Vision Capital. The lead investors in the partnership were Goldman Sachs’ GS Vintage Funds, together with funds managed by Landmark Partners. Other investors included funds managed by Paul Capital Partners, Unigestion, AIG SunAmerica, Pomona Capital and the Broad Foundation.

Most recently, in 2005, the firm acquired a portfolio of companies from Legal & General Ventures. The investments included: Trident Components Group, a European leader in the manufacture of automotive components, and Coal Products Limited, a UK manufacturer of smokeless fuels. The portfolio was acquired by VCP V, a new investment partnership with €120m of committed capital, established and advised by Vision Capital. The investors in the partnership included Goldman Sachs Asset Management, Landmark Partners, Paul Capital Partners and Pantheon Ventures.