The London-based private equity firm raised about €5.3bn in committed capital from investors for its 11th flagship fund, according to people familiar with the matter. BC Partners had originally sought €8.5bn in what was meant to be its largest fund to date, but struggled to convince some long-term backers to recommit, even after extending the fundraising by several months.

The total amount available to deploy is about 7 billion euros as the firm put in some of its own money and attracted some large co-investment commitments, said the people, who asked not to be named discussing private information. The co-investment structure allows institutional investors to join major takeovers alongside the private equity manager.

BC Partners declined to comment for this story.

Pandemic Pain

It’s a notable miss by one of Europe’s largest buyout groups. Its previous fund closed in 2018 with 7 billion euros, after raising money over about 18 months. This time, the process stretched to almost two years and was complicated by the Covid-19 pandemic, which restricted in-person meetings and left investors focused on their existing portfolios, Bloomberg News reported last year.

People with knowledge of the matter said the fundraising effort ended better than once feared and pointed to bad timing, as the firm marked down valuations within its 10th fund to reflect changing conditions in the early days of the pandemic. That lowered returns and made performance look more volatile just as the firm was starting to market the 11th fund, said the people with direct knowledge of the matter.

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Even so, rivals such as CVC Capital Partners have successfully gathered ever larger capital pools since the pandemic broke out. In total, Europe-based private-equity firms got $70 billion in fresh capital last year with managers on average hitting 111% of their target, according to data from Preqin.

BC Partners has already begun to make acquisitions with the new fund, including medical provider Women’s Care Enterprises and insurance technology outfit Davies Group. Its other projects such as a debut real estate fund and a follow on credit fund are dong well.

Meanwhile, the firm’s 10th buyout fund has an internal rate of return of 17.3%, putting it in the third quartile of similar funds, while the ninth fund has a 16.3% internal rate of return, putting it in the second quartile, according to data compiled by Bloomberg.

Mixed Portfolio

BC Partners, which was spun out of Barings Bank in the 1990s, is led by Chairman Raymond Svider, who directed a major overhaul of the firm’s structure in 2017. Svider runs BC with his executive committee, Nikos Stathopoulos, Fahim Ahmed and Jean-Baptiste Wautier.

Its existing portfolio of companies features a number of standout performers — along with some misses. BC Partners acquired retailer PetSmart in 2015 and online rival Chewy Inc. in 2017, before turning them both around and taking the latter public. PetSmart is in talks to go public through a blank-check company backed by private equity firm KKR & Co., Bloomberg reported in January.

Last March, Svider told an industry conference that the two pet product companies were “shaping up to be probably the largest capital gains so far in the private equity industry.” He spent some time in 2017 helping to run PetSmart from its Phoenix, AZ headquarters.

On the other hand, during 2020 satellite operator Intelsat SA filed for bankruptcy, Dublin-based CarTrawler went through a major restructuring, and restaurant chain Cote was taken over by Partners Group Holding AG after being hit by government lockdown measures.

The fundraising miss shows the intense battle for investors, known as limited partners in the private equity industry, with many firms pursuing record-breaking funds. “LPs are struggling with capacity as the number of funds is multiplying,” said Karl Adam, partner at Monument Group, which helps raise money for private markets funds.

Private equity consultants and others familiar with the firm who discussed why the fundraise had struggled said some investors found BC Partners hard to categorize at a time when many investors were trying to trim the number of managers they worked with. The biggest firms tout their behemoth size and reach, while some smaller players have developed niches in particular industries.

“PE managers need to be telling the right story to investors,” said Peter Morris, a private equity researcher and author of academic papers on the industry. “If people want a sectoral approach you need to tell a story about your sector-led investment approach.”

Source: BNN Bloomberg

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