With all the noise coming out of New York concerning it’s pension fund scandal and it’s subsequent repurcussions, it may be useful to review what fund managers should expect from placement agents. From the 2nd edition of the Definitive Guide to Private Equity Fundraising, here’s Kelly DePonte of Probitas Partners on the very subject:
European Private Equity firm Charterhouse has closed its latest buyout fund, Charterhouse Capital Partners IX, on €4 billion – €2 billion short of its initial target.
The firm held a €3.6 billion first close of the vehicle late last year and had been targeting €6 billion. While this figure is significantly off the orginal mark, the now fully closed total does mean that the fund is the same size as its predecessor. And with fundraising at a six-year low that’s not nearly as bad as it seems.
Private Equity fundraising (this includes the whole spectrum of the industry – from mega buyout shops to smaller venture capital firms), nose-dived to a paltry $46 billion for the first three months of 2009, down from $125 billion just a quarter before. According to Preqin, this marks the lowest sum since $34 billion was raised in the fourth quarter of 2003.
Are we surprised? Nope. Can it go lower in Q2? Yup. Will it? There’s a damn good chance of it. Too many LPs are nursing wounds, write-downs, Ponzi schemes, liquidity issues, villagers with pitchforks, and any other ominous issues that you can think of. But also remember that despite all this, and despite the worst recession in decades, things only reverted back to Q4 2003 levels. Sadly though, this is before far too many of today’s PE pros got into the game. Their industry memories don’t go back that far. Maybe it’s time to go to the bullpen?
According to the EVCA, European Private Equity funds raised €65.3 billion last year, a fall of 20% when compared to the €81.4 billion they raised in 2007. For the year, 128 funds reached a final close, down from 144 in 2007. Average fund sizes also tumbled, from €496.9 million in 2007 to €425.7 million in 2008.
Venture and Growth Capital proved to be fundraising bright spots as 47 VC funds reached a final close (compared with 37 the previous year), with an average fund size of €84.7 million. For Growth Capital, ten funds raised nearly €3 billion, compared to nine funds raising €2 billion in 2007.
The number and value of buyout funds fell from 62 funds that raised €56.5bn in 2007 to 53 funds raising €44.4bn last year. And in terms of the sources of capital raised, pension funds were by far the largest contributor, accounting for 23% of all funds raised or €15.2bn, compared with 17% and €13.9bn in 2007. At the same time bank commitments halved from just over €9bn to €3.8 bn.
Additonally, the EVCA included numbers on exits which, when measured at cost, were reduced by halve in 2008, from €26.6 billion in 2007 to €13.1 billion, with trade sales and secondary buyouts representing two-thirds of the exits. Unsurprisingly, the public markets were effectively closed with only nine IPOs occuring, six of which were venture-backed companies and three buyout-backed.
According to a report by Preqin, the total level of dry powder available to Private Equity worldwide is currently $1.02 trillion. Funds in Europe hold $165 billion of this total. This global figure comes after PE firms raised $554 billion in 2008, $346.1 billion coming in the first half, followed by a slowdown in the fundraising pace to $207.7 billion in the second half. At the moment there are 1,684 funds targeting an aggregate $888 billion in commitments worldwide, however look for many of these firms to delay or reduce their closings. 2009 won’t come close to the over half a trillion raised last year.
The Carlyle Group’s second European technology fund has just closed at €530m, exceeding its initial target of €500m. The fund, Carlyle Europe Technology Partners II, was founded in 2007 and invests in emerging technology companies in Europe. This is its first and final close.
The Carlyle Group has long displayed an interest in European tech firms, dating back to 2000 when they launched Carlyle Venture Partners and raised €553m for venture capital investments in emerging technology companies in Europe. CETP II follows upon the success of Carlyle Europe Technology Partners which was launched in 2005 and raised a total of €222m.
CETP II invests between €20m and €60m in small and mid-cap buyouts and expansion capital, focusing on technology companies operating in Carlyle’s core sectors of aerospace and defence, automotive and transportation, business services, consumer and retail, energy and power, financial services, healthcare, industrial, infrastructure and telecommunications and media.
The Carlyle Group now manages €15.4 billion in 17 dedicated European funds across corporate private equity, real estate and alternative investments.