Fundraising, post-Foxtons

One of the “big guns” of European private equity, BC Partners, will this year embark on a fundraising process that will be keenly followed by industry observers. Much attention has been paid to the firm in the past 12 months, for both good and not-so-good reasons, and this year’s marketing process – likely to kick off in the “latter part” of 2010, according to a source close to the firm – will show how LPs feel the firm has performed through the crisis.

The planned fund launch carries many features that are fast becoming hallmarks of post-crisis private equity fundraising. For one thing, the firm is not planning to up its fund size; it intends to raise a similar amount of capital for its next fund as it did for Fund VIII, which closed on €5.8 billion in May 2005. The firm is also looking beyond its historic LP base – 90 percent of which is accounted for by US and European institutions – to tap new investors in the Middle East and Asia.

Foxtons: Marginal influence on returns, says BC

BC has recorded several victories in the last year that it will no doubt be keen to underline to LPs. It agreed one of 2009’s most eye-catching exits in November with the sale of Unitymedia, a German cable television provider it co-owned with Apollo, to US media group Liberty Global for €3.5 billion. The deal is set to generate an internal rate of return of around 40 percent, a source close to the process told sister website PrivateEquityOnline at the time.

The firm also made significant inroads into the US market, making its first two investments in the country: a $350 million injection into New York-listed office supplies business Office Depot and the secondary buyout of secondary education provider ATI Enterprises, bought from a consortium including The Riverside Company and Primus Capital. These and other investments contributed to the fact that the firm has now deployed €1.3 billion since the collapse of Lehman Brothers in September 2008.

BC’s most recent investment, however, caps off a year-long process the firm will most likely consider to have been an unwelcome distraction. In late December the firm injected nearly £50 million (€57 million; $82 million) of fresh equity into estate agent Foxtons as the conclusion to a lengthy capital restructuring, the outcome of which saw BC’s stake in the company reduced from a controlling majority to a minority stake. Foxtons’ lenders – Bank of America and Mizuho – between them now own the majority of the equity, although BC remains the largest individual shareholder.

Foxtons is a highly recognisable brand in the UK; the logo adorns shop fronts, for-sale signs and the company’s omnipresent BMW Minis throughout London. As a result the difficulties faced by the investment have been widely publicised. One secondaries investor described the investment as making BC Partners look “foolish”.  The firm has, however, taken pains to point out that the initial investment in Foxtons accounted for just a little over 1 percent of the equity from Fund VIII, and hence would not have a significant impact on fund performance.

With Foxtons seemingly out of the headlines for the near future, BC will focus on returning some more cash to investors. Among the portfolio companies understood to be being readied for IPO are Amadeus, a Spanish technology provider to the travel industry, and Medica, an operator of care homes in France and Italy. Some fresh realisations would certainly aid BC’s fundraising team – led by the ex-head of Goldman Sachs’ European financial sponsors group, Charlie Bott – as it starts in earnest to court LPs old and new.