fundraising special - BVCA admin

2011: the Year of Venture 

fundraising 

special 

A guide to raising capital 

BriefingJanuary 2011 

Healthcare provision in the UK Q&A: fred Wakeman 

January 2011 BVCA Briefing 1

The FT calls us the 

‘go-to’ law firm. 

So why go anywhere else? 

Talk to a law firm whose Private Equity and Venture Capital 

teams have worked with some of the biggest success stories. 

To find out more please visit www.olswang.com or contact 

Stephen Rosen at stephen.rosen@olswang.com

January 2011 

Contributors 

Special thanks to Noel Ainsworth, 

Bryony Livingstone, David Bailey, 

Anthony Tulloch, Fred Wakeman, 

Alexander Pankov and Simon Jamieson 

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Tom Allchorne 

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Nicola Smart 

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Leon de Bono 

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events 

Kristina Gauzel 

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Training 

Leonie Pilgrim 

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Contents 

Letter from the CeO 3 

fundraising special 

A guide for first-timers 4 

Venture on the fundraising trails 6 

new fund, new challenges 7 

Mid-market hits the road 8 

in-house or outsource? 9 

The legal and regulatory checklist 10 

Mega funds chase the money 11 

The Year of Venture 12 

Q&A with fred Wakeman, Advent international 14 

The future of healthcare provision 17 

BVCA Portfolio Company Management Awards 2011 19 

The russian Private equity initiative 20 

Public policy update 22 

industry index 25 

Market statistics 26 

Transaction tracker 29 

LP voice with Simon Jamieson, ff&P 32 

Kurt geiger case study 33 

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NEW 

Investor Relations 

and Fundraising 

course 

21 June 2011 

As firms join the fundraising trail at an unprecedented 

rate, the investor relations role has never been so crucial. 

With this in mind the BVCA has developed a new Investor 

Relations and Fundraising course, examining what 

institutional investors really want and how to best manage 

relationships. 

Speakers include leading industry practitioners 

and representatives from the BVCA investor 

relations Committee. 

Topics include: 

• Why the role is now more crucial than ever 

• The IR role in private equity 

• How to establish the IR function 

• Technical expertise for the role 

• Key concerns of LPs 

• Fundraising and managing the process 

• LP reporting 

• Investor relations management 

• Crisis management, communication 

and transparency 

Investing 

in training, 

enhancing 

returns 

Training and 

Professional 

Development 

in-house training options 

also available 

Open to members 

and non-members 

For further details please 

contact Leonie Pilgrim, 

Training Manager 

lpilgrim@bvca.co.uk 

T: +44 (0) 207 420 1823

CeO 

Simon 

Walker 

Happy New Year and welcome to the first edition of the BVCA 

Briefing of 2011. An exciting year awaits all of us I feel, not least 

of all myself for this will be, sadly, my last column as CEO. 

I will leave any lengthy valedictory address for another time but suffice to say that the last 

three plus years have been anything but dull. When I joined in 2007, private equity was 

pretty much enemy number one. Coming from a corporate communications and public 

affairs background, one of my main tasks was mutual education: that is educating the 

private equity industry as to the nature of the media and government, and then educating 

politicians and journalists as to what the private equity model really involves. 

Contrasting then and now, I think it is fair to say that the reputation of private equity is in 

a better state than it was. Obviously I am going to say this, but I think even objectively it is 

the case, helped in no small part by the new stance on disclosure and transparency, which 

started with the Walker Report in late 2007. 

As an industry I believe that private equity now understands far better than it did how the media 

and government operates and at the BVCA we have certainly adapted our communications 

strategy to manage bad news or attempting to convey more positive information. 

And as my tenure started when the industry was under intense political scrutiny, so it closes 

as the industry finds itself on the cusp of new regulatory scrutiny. Whilst the first phase 

of the Alternative Investment Fund Managers (AIFM) Directive may be over, the next two 

years will be crucial in ensuring the application of the Directive is fair and appropriate to 

our industry, and I have every faith that the BVCA will work tirelessly to that end. 

On that note, I wish to thank everyone at the BVCA for their hard work and dedication, 

and all those within the industry who have been, and continue to be, a constant source of 

support and advice for the organisation. 

I also wish the best of luck to my successor, the extremely capable and distinguished 

Mark Florman. Mark, with a background in politics and finance, including a stint at 

Doughty Hanson, will no doubt lead the BVCA to even greater heights, although I must 

admit I can’t help but be slightly envious that he joins at a time when the industry is on 

an upward swing rather than at its lowest ebb like I did. I’ll be sure to let him know how 

lucky he is on a regular basis. 

Simon Walker 

Letter from 

the CeO 


Comment 

noel Ainsworth, a partner at law firm Simmons & Simmons, takes you through the legal and 

commercial considerations for first-time private equity funds. 

First time private equity fund GPs come in a variety of guises: they 

may be an existing team spinning-out from a PE house or a bank; 

a collection of principals from a number of firms with a common 

vision, or a group of corporate executives that are looking to leverage 

their operational expertise. In each case there are a number of key 

issues, both legal and commercial, that a first time GP will need to 

bear in mind when looking to successfully raise a debut fund. 

The first and most important consideration is to establish what 

it is that differentiates the new offering from the other funds in 

the market – this may be a novel investment strategy, particular 

operational or geographical expertise or simply an outstanding 

investment track record. Whatever it may be, LPs will need to be 

persuaded that the product being marketed is not something they 

can get from other, more established firms with more substantial 

track records. 

The offering itself is not all – as one of the doyens of private equity, 

Henry Kravis, has said “you only have one thing to sell in life, and that’s 

yourself”. The investment team is being sold to LPs as much as the 

fund product, and LPs are looking for a team that can demonstrate 

a complete skill set, from sourcing investments, making operational 

improvements and executing successful exits, and one which they 

can partner with for the long term – after all, they will be entrusting 

significant funds to their chosen manager for an extended period. 

The team’s skill set should also be supported by a verifiable track 

record which is consistent with the proposed fund’s investment 

strategy, which in some instances may be hard to compile, or 

subject to confidentiality constraints. In extreme cases, a trawl 

through publicly available data may be required to put together the 

track record. 

LPs also look to partner with their GPs on a multi-fund basis, so that 

in order to attract investors, new GPs need to have an appropriate 

long-term outlook for their business which can convince potential 

investors that the relationship they intend to build can succeed 

for a number of funds, and not just for the purposes of the initial 

fundraising. 

4 January 2011 BVCA Briefing 

A first time 

for everything 

The terms of the fund are also key. These should be at least in line 

with, or more generous than, prevailing market standards. Economic 

provisions are fundamental – LPs will look for a management fee 

which is based on budgeted costs and overheads (and may well 

ask to see how these are calculated) and a carried interest based 

on a ‘fund-as-a-whole’ waterfall, with appropriate clawbacks and 

guarantees from the investment team. LPs will also almost certainly 

want to see a substantial amount of investment in the fund from 

the principals to further align interests between GP and LP, although 

investors are likely to be reasonable with first-time GPs, taking into 

account the financial position of the principals. 

For new funds targeting institutional money, the Institutional Limited 

Partners Association (ILPA) represents a powerful investor lobby, and 

adherence to the guidelines set out in ILPA’s Private Equity Principles 

is also a means for a new GP to stand out from the crowd. A word of 

caution, however: while the majority of the principles are reasonable 

and many either are or are becoming market standard, some are 

more controversial and should be less acceptable to managers. It is 

important when discussing these to ensure that the fund has legal 

advisers that are attuned to the latest market developments and 

can advise on what is and what is not acceptable when looking to 

embrace the Private Equity Principles. 

Along with choosing the correct legal adviser, new GPs should ensure 

that their other advisers (including placement agents, administrators, 

compliance consultants and auditors) are experienced in the 

establishment of private equity fund businesses so that these 

advisers are able to give tailored support to the GP in matters where 

the investment team may not have detailed or extensive experience. 

We regularly advise new GPs on the structuring of their private 

equity fund management businesses and the launch of their debut 

funds, and are a trusted strategic partner of the BVCA in providing 

training to debut private equity fund businesses. 

If you have any questions on any aspect of establishing a new 

private equity fund business, please do not hesitate to contact us.

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Comment 


Venturing on the 

fundraising trail 

Ahead of the much-anticipated wave of funds set to hit the market this year, Patrick McCurry 

reports on the hopes and fears of Britain’s venture capital community. 

The venture capital industry in the UK and Europe is facing tough 

fundraising conditions. This is partly due to the general squeeze 

on available investment capital from LPs as well as the asset class’s 

poor returns in recent years. 

“We see the fundraising environment as challenging in the short 

term, as returns for the venture sector as a whole have been poor 

since the dot-com bubble, both in terms of IRR and liquidity,” says 

Richard Anton, a partner at Amadeus Capital Partners. But he believes 

that this situation will change in the longer term, as improved venture 

performance starts to show through in the industry figures. 

He adds that it is ironic that the current fundraising challenges come 

against a backdrop in which venture investing and realisations 

are looking very positive: “Deal flow is good at the moment and 

portfolio companies are of high quality. Also, pricing on entry is 

reasonable and portfolio companies are performing well because 

the market segments venture is invested in are doing well. Our 

businesses have done well through the recession and afterwards.” 

Calum Paterson, managing partner of Scottish Equity Partners 

(SEP), argues that successful fundraising in this asset class will 

come down more to the long-term performance of individual 

firms rather than the venture industry as a whole. 

“Clearly, these have been tough market conditions but what’s 

important is how firms have responded to the challenges and the 

extent to which they’ve been able to navigate their way through 

choppy waters,” he says. 

Paterson believes that general fundraising conditions for venture 

are unlikely to become more benign for a long time: “But our 

investors are more interested in track record over the long haul 

than the pace of exits over the last couple of years. They want 

to see a credible investment model, experienced team and strong 

leadership. 

“Maintaining good investor relations is also important, not just 

when you’re embarking on a fundraising drive but throughout 

the life cycle of a fund so that investors are aware of the strategic 

milestones that have been achieved and the value created.” 

Amadeus’s Richard Anton says that the exit environment is 

becoming rosier for venture, which should have a knock-on effect 

on fundraising in the longer term: “Trade buyers came back to the 

market in 2010, as many corporates in technology are cash rich 

and need to buy in technology innovation. The IPO market has not 

really re-opened, however.” 

He believes there will be only modest fundraising in 2011, with 

only a relatively small number of venture firms tapping the market. 

But those who do embark on raising capital may reach their goals, 

he believes, because of limited competition. 

“Most people in the venture capital industry are positive about 

the longer-term trends for the sector,” he says: “Trade buyers are 

making more acquisitions, which means more competition for 

assets and that pushes up prices. 

“It is also the case that the cohort of companies in the portfolio 

of many VC firms is more mature, because until recently the exit 

market has been subdued. That means that those more mature 

portfolio companies are generating higher earnings than might 

normally be expected and their underlying operational growth is 

good. A much higher proportion of our portfolio companies are 

now profitable than ever before and that means they are more 

attractive to more classes of acquirer and so will fetch higher 

values at exit.”

Comment 

New fund, 

new challenges 

The heavier regulatory burden on financial services means new managers of start up and spin 

out funds are facing an increasingly complex regulatory landscape, writes Bryony Livingstone, 

a member at Kinetic Partners. 

In the early stages of establishing a new group, the key concerns 

centre around structuring the fund, building the investment 

team and determining whether or not the fund is likely to attract 

enough investors to get off the ground. There are now a number 

of challenges facing new managers which mean that regulatory 

issues need to be considered even earlier on in the process than was 

previously the case. 

One of the practical challenges facing new managers is that the 

lead time to become authorised by the Financial Services Authority 

(FSA) has increased considerably in the last two years. The statutory 

timescales for processing applications have not changed and remain 

up to a year (for incomplete applications). Previously the FSA worked 

to and often exceeded its voluntary service standards of processing 

75% of new managers’ complete applications within three months 

of receipt. However, this is no longer the case and to reduce the 

possibility of delays to first close (by when managers would need 

to be regulated), applications for regulation need to be submitted 

much earlier in the process. 

Together with the longer approval process, the regulator is adopting 

a more forensic approach to its scrutiny of new applications. Case 

officers dealing with applications request detailed information 

and will require drafts of legal documentation so that some of the 

decisions and drafting that a new manager could often in the past 

delay to nearer to close now have to be carried out much earlier in 

the fundraising process. Consequently lawyers’ and other advisors’ 

fees are likewise incurred earlier on when there is less certainty that 

the business will succeed. 

The FSA’s prudential requirements require firms to provide at least 

12 months’ month-by-month P&L, cash flow and proof of adequate 

capital, amongst other things. The amount of capital required will 

be dependent upon cash burn and start up costs as well as the FSA’s 

‘headline’ financial resources requirement which tends to be low 

for most venture capital managers. The FSA stress tests financial 

projections, for example to determine whether a fund can cope with 

several months’ delay to closing. 

There is a range of non-prudential regulatory requirements that new 

managers need to consider, including requirements for adequate 

systems and controls to be in place on authorisation, establishment 

of effective governance, conflicts policies, and compliance with 

five key threshold conditions. From the financial crime perspective, 

rigorous anti-money laundering controls are required including 

detailed processes for KYC/source of funds identification for 

investors and KYC/due diligence processes for potential investments 

of the fund. The new bribery provisions are an additional area of 

compliance that will attract greater regulatory focus in 2011. 

The unprecedented regulatory burden does not stop with the UK’s 

regime. In the US the Dodd-Frank Reform Act raises more regulatory 

considerations which will require some managers to also become 

registered with the SEC from 21 July, 2011 and for others to provide 

information to the SEC as “Exempt Reporting Advisers”. Those 

requiring dual regulation will need to submit applications to the SEC 

as well as to the FSA and to comply with both sets of regulations. 

Although the regime has not yet been finalised, the SEC has 

proposed that Exempt Reporting Advisers will include “Venture 

Capital” managers (narrowly defined), and a further category 

entitled “Private Fund Advisers”. The proposal is that these Exempt 

Reporting Advisers will be required to submit reports including 

detailed information about both the manager and the funds to the 

SEC, and that this information will be publicly disclosed. The SEC 

would have access to the books and records of Exempt Reporting 

Advisers as the proposals are currently drafted. The only managers 

who would not be subject to either SEC reporting or registration 

would be those who: have no place of business in the US; manage 

less than US$25m of investments from US investors; have fewer 

than 15 US investors; and do not hold themselves out generally to 

the public in the US as an asset manager. 

At the European level the AIFM Directive is due to be implemented 

by member states within two years and will affect the way managers 

and their funds are structured. The wide ranging provisions of the 

Directive add yet another layer of requirements and disclosures to 

be considered by start-ups and spin out managers. New managers 

need to plan ahead and structure funds to take account of the 

provisions of the Directive on their business. 

New managers are increasingly required to satisfy many and 

complex regulatory conditions early on in their formation process. 

Long lead times for FSA authorisation in the UK mean that forward 

planning and early decisions are required, whilst European and US 

driven regulations add to the burden. It is important, especially for 

first time managers, to tackle these regulatory challenges early on 

in the process, and if necessary, to seek specialist advice to ensure 

compliance at each stage of the authorization process, across all 

relevant jurisdictions. 


Comment 


Mid-market prepares 

to run the gamut 

While it is likely to be a difficult fundraising year for mid-market firms, those with achievable targets 

and that have a good track record and experienced team stand a good chance of success. 

Overall, fundraising numbers for UK firms in 2011 are likely to be 

a little up on 2010, says Jeremy Lytle, investor relations director at 

ECI Partners, which successfully fundraised in 2008. But this year will 

still be tough, he adds, pointing to surveys suggesting a substantial 

number of UK LPs do not intend to invest in private equity this year. 

“LPs are cautious, but there were some successful fundraisings last 

year by smaller funds – those with good performance and a stable 

and experienced team,” he says. 

One trend that mid-market funds may be able to take advantage of 

is the disaffection with mega funds among some LPs: “Some of the 

big LPs, who invested purely in large buyout funds in the early 2000s 

to 2007, are now looking at the mid and lower mid-market in order 

to diversify their allocation.” 

Rod Richards, managing partner at Graphite Capital, agrees that 

the mid-market could benefit from a shift in perspective among 

investors: “It may be easier for mid-market firms to raise money than 

larger firms, but only those firms that have a good track record will 

succeed.” 

He adds that firms will be judged by investors on what they have 

done over many years, not just in the good times: “People will be 

looking at what firms have done in the run-up to the downturn and 

afterwards and will want evidence that firms have invested well in 

the new market conditions. There will be some skepticism about 

returns made pre-crash.” 

If mid-market firms in the fundraising cycle can demonstrate to 

investors their ability to add value to investments, they stand a good 

chance of winning over some LPs that would have traditionally only 

backed mega funds, says Richards. 

LPs will be looking at whether a particular firm really offers them 

what they are seeking, says William Gilmore, investment director at 

Scottish Widows Investment Partnership: “LPs will need to decide 

whether they want a pan-European focus or a country focus. For 

smaller markets and southern Europe, many LPs may be satisfied 

with having those covered in a pan-European fund.” Differentiation 

will also be important for mid-market firms, he says, whether that be 

how they source deals or a sectoral specialism. 

Overall, the fundraising market for private equity is likely to be very 

competitive in 2011 because there are expected to be more firms 

seeking capital. This will put a lot of pressure on GPs, who will find 

it harder to meet LPs and have to meet much tougher demands as 

part of LPs’ due diligence. 

Having said that, the mid-market and lower mid-market have 

certain strengths, says Andrew Bentley, a partner at advisory firm 

Campbell Lutyens: “It is perhaps easier to see how GPs can add 

more operational value and therefore less of a reliance on debt and 

structuring than bigger firms. LPs are assuming that multiple growth 

and leverage will play far less of a role in successful investments in 

the next few years than before.” 

A key ingredient in successful fundraising by mid-market firms this 

year will be keeping on board a high proportion of their existing 

LPs, says Jeremy Lytle. Five years ago the general expectation for 

fundraising firms was to have 60%-70% of existing shareholders recommitting: 

“Today, while the figure is likely to be a bit lower than 

that, GPs will want to keep as many of their existing LPs as possible 

committed because then they have less of a shortfall to fill with new 

investors.”

Comment 

To do or not to do, 

that is the question 

The dilemma over whether to outsource back office activities remains as pointed as ever. 

David Bailey, managing partner at Augentius Fund Administration explores the issues. 

With higher levels of regulation, increasing demands from LPs and 

greater needs for transparency, the GPs world is getting more and 

more complex. More often than not GP groups, particularly new 

GPs, do not have the capabilities to meet and service all the specific 

demands being made of them. GPs are expert in identifying portfolio 

companies, enhancing their value and then taking a profit. They are 

not necessarily expert in IFRS or US GAAP, putting in place disaster 

recovery technology and strategies or implementing accounting 

technology installations and updates. 

Similarly fund structures have become more complex and diverse. 

The reality is that life has got far more complex and, with impending 

legislation, is likely to get even more complex, i.e., the need to produce 

multiple GAAP accounts plus the need for compliance with the AIFM 

and the regular production of NAV calculations. 

In recent years more and more GPs have turned to specialised private 

equity fund administrators to provide a professional and expert service 

to their fund. Initially only located in offshore locations, the private 

equity fund administration business has come ‘onshore’ over the last 

10 years and now provides full service to GPs across a wide range of 

domiciles. With administrators expanding their global spread it is now 

possible to appoint one administrator to deal with all the entities in 

a multi-jurisdictional fund/structure thus streamlining processing and 

reducing costs elsewhere. 

Fund administrators whether they are servicing onshore or offshore 

structures generally deal with all aspects of the ‘back office’ work of 

the fund. This includes: 

• Operational reviews of fund documentation 

• Design and setting up of all drawdown/distribution notices; 

quarterly and annual accounts in the ‘look and feel’ of each GP 

group. Everything should be tailored to each individual manager – 

the use of a fund administrator should not lead to ‘standardization’ 

if this is not appropriate 

• Carrying out all limited partner due diligence to include AML and 

KYC checks as appropriate along with ongoing annual checks 

• Maintenance of all accounting/financial records to include regular 

reconciliation of bank accounts with financial records 

• Generation and distribution of all call letters to cover costs/deals 

and monitoring for receipt of cash from all LPs 

• Payment of all expenses in accordance with instructions from 

the GP 

• Calculation and payment of all management fees on a quarterly 

basis – or as per the agreement 

• Modeling and systemisation of carry distribution and subsequent 

calculation and payment of carry once payable 

• Calculation and payment of all distribution monies, taking into 

account all ‘opt-outs’ 

• Preparation and distribution of quarterly/periodic investor 

reporting to all LPs to include individual capital statements for 

each LP 

• Preparation of annual audited accounts, management of the audit 

process and subsequent distribution to individual LPs 

The quality of staff and systems are the key components that 

determine the quality of service provided by any administrator. Given 

the nature of the complexity of the structures involved it is imperative 

the funds are serviced on a day to day basis by properly qualified staff, 

who understand private equity structures and the processes involved. 

A service level agreement (tailored to the individual needs of the fund 

and client) should be put in place and actual performance should be 

monitored against the SLA on a regular basis. Given the pressures from 

LPs it is imperative that all reporting is delivered within all promised 

deadlines. LPs do actually monitor who delivers what and when – and 

late delivery may mean a reluctance to re-up in future funds. 

But people change from time to time and it is important that any 

administrator has sophisticated technology to aid LP reporting and to 

ensure both the integrity and security of data. Without proper systems 

(which does not include Excel!!), the opportunity to automate many of 

the processes will be lost and errors will be made. Again, this can only 

create problems and the potential for criticism from LPs. In addition 

proper disaster recovery facilities must be in place – it’s a regulatory 

requirement. 

It goes without saying that ‘you get what you pay for’. Some 

administrators will provide a cheap service, using lower quality staff, 

minimal technology and inflexible service levels. Others provide a hitech 

environment ensuring the integrity of data and use fully qualified 

professional staff providing a tailor-made solution. Each GP will 

determine the solution that suits them best but they should be aware 

of the cheap solutions – economy in the first instance can give rise to 

higher costs in the future if errors are made or data lost. In any event 

the cost of a professional administrator (which is generally paid for out 

of the fund) is rarely little more than a few basis points. A small price to 

pay for complete piece of mind. 


Comment 


The fundraising 

checklist 

There are several key issues every GP raising a fund needs to consider, explains Anthony Tulloch, 

partner in the corporate group and head of investment funds at international law firm Olswang 

Overarching perceptions of private equity across the market are 

strong; studies have shown that the vast majority of private equity 

backed companies believe they would not have enjoyed the same 

level of accelerated success without private equity funding, and 

banks perceive private equity funds to be comparatively low risk and 

therefore their propensity to lend to them is higher. 

Nevertheless, recent research from data provider Preqin highlights 

the problems facing the sector. The reality is that thanks to liquidity 

issues among investors and a lack of confidence throughout the 

marketplace, private equity fundraising fell to a six year low in 2010. 

Overpayment for portfolio companies before the crisis and premature 

maturity of bank loans due to the contravention of covenants have 

meant that many funds have performed poorly. 

However, discussions with our clients indicate that conditions are set 

to improve in 2011 and research shows that 54% of investors plan to 

invest more capital in 2011 than 2010. 

In anticipation of this shift, we at Olswang are working with GPs to 

maximise investment opportunities in the coming year. Though 

conditions are set to improve, LPs are more cautious and new 

legislation has operated to increase the obligations of the GP, 

requiring a more steadfast approach to fundraising than ever before. 

In anticipation of these challenges, below is a sample of just some 

of the issues we recommend our clients consider to ensure the 

expectations of 2011 become a reality: 

fees 

Management and transaction fees are coming under more scrutiny 

than ever before. GPs should expect discussion both on the gross 

amount of the management fee and on the offset for transaction 

and other fees. 

However, where costs are being squeezed by investors, GPs should 

simultaneously be looking for ways to minimise the costs of their 

own professional services providers. For example, here at Olswang 

we maintain that clear, simplified legal documentation should be 

used with our business partners to minimise bureaucracy and the 

risk of error whilst ensuring that time and money is not wasted on 

deciphering legalese. Our experience tells us that finding smart 

and efficient professional service partners who are willing to work 

alongside you to minimise costs will ultimately permit the GP to 

translate these savings into savings for their investors. 

Legislation 

The European Union’s Directive on Alternative Investment Fund 

Managers (AIFMD) intends to harmonise the regulatory standards 

of private equity funds. The final version seems to be a lot less 

problematic than was initially feared. Where this potentially creates 

an issue, however, is for smaller venture capital houses that fall 

beneath the threshold of the Directive. Their lack of regulation 

may prove a deterrent to investors and therefore they may need to 

register themselves voluntarily. 

The Bribery Act, enacted but not yet in force, and already under 

scrutiny by the new government, is also impacting GPs, requiring 

procedures to be in place to ensure no companies within the 

portfolio contravene the particulars of this legislation. 

responsible investment 

Many of today’s investors are not only looking for an entrepreneurial, 

unique product but a package that takes responsible investment into 

consideration. Seeing beyond the greenwash and appreciating how 

maintaining procedures that ensure compliance with guidelines such 

as those of the UN on environmental and social responsibility and 

corporate governance will ultimately help to safeguard the value of 

their investments. 

Transparency 

Though investment may increase in 2011, so too will the requirement 

for accountability. The Walker guidelines are set to be more stringently 

adhered to and investors will expect transparency as to the status of 

their investments and the performance of portfolio companies, to a 

far greater extent than is common with public companies. 

Private equity in partnership 

At such a challenging time for the GP, insight from your professional 

service providers will become increasingly important. Through 

selecting a partner who shares your values, understands your concerns 

and intelligently anticipates and responds to market conditions, there 

is no reason why 2011 should fail to meet expectations. 

Our client, Piraeus Clean Energy agrees: “Our clean energy fund, 

sponsored by Piraeus Bank as its cornerstone investor, is approaching 

international investors at a time which, due to the international 

economic climate, is a very difficult one for fundraising. Throughout 

the process, Olswang have given us great advice on terms and 

conditions in today’s market, and on the matters that are of concern 

to investors today.” 

For more information on Olswang’s Investment Funds team, contact 

anthony.tulloch@olswang.com.

Comment 

Mega funds 

or mega flops? 

Amid increased LP scrutiny, question marks have been raised over the ability of the world’s 

largest firms to raise the sorts of capital they are used to. Patrick McCurry reports. 

In the boom years many LPs were desperate to invest in large, 

or mega, buyout funds. But since the financial crisis LPs have 

questioned a business model that appears to rely on high leverage, a 

rising market and financial engineering to achieve results. 

That does not mean that all mega funds will struggle to raise capital 

going forward, but LPs have become choosier and future fund sizes 

are unlikely to match some of the huge sums raised in the past. 

Some traditional investors, such as endowments and foundations, 

have reduced their commitments to private equity and less 

sophisticated LPs, such as some family offices, have withdrawn. But 

insurance companies are still interested and there have also been 

some new entrants, such as sovereign wealth funds, who have lots 

of liquidity but are also very demanding. 

Kurt Bjorklund, co-managing partner at Permira, is positive on the 

future trends for fundraising: “Even LPs that have had a rough ride 

are now starting to see significant capital returns and an improving 

macro environment.” Private equity is relatively attractive to these 

investors, he says, as bond returns are threatened by inflation. 

“LPs are returning to a more normal investment approach, though 

funds are likely to be a little smaller than in the past,” he says, adding 

that although the mega funds were out of fashion a year ago things 

have moved on. “The industry hasn’t seen the widespread busts in 

portfolio companies that some were predicting and in our latest 

fund we’ve seen EBITDA growth of 40% in the past year.” 

An indication of the environment for large funds will be how well 

BC Partners does this year in its attempt to raise nearly €6bn – the 

largest European fundraising since the collapse of Lehman Brothers. 

Cinven is also planning to fundraise. 

If these two manage to successfully meet their targets, and the initial 

indications are encouraging according to people in the market, it will 

send out a positive message for other large funds. 

Andrew Bentley, a partner at advisory firm Campbell Lutyens, says 

the sheer size of mega funds brings its own challenges given the 

liquidity issues facing LPs: “To raise a similar sized fund as in the past 

a mega fund may need to deal with twice as many investors, which 

means the fundraising is likely to take longer.” 

He adds that there has been some disaffection with larger funds and a 

backlash against fees. “There’s a perception that they did well in a rising 

market but will find it harder in today’s climate, so GPs really need to 

demonstrate that they know the companies and sectors they invest 

in extremely well and can add value at a strategic and operating level.” 

Moose Guen, founder of PE advisers MVision, says that the mega 

funds have experienced a hit to their reputations since the credit 

crunch, which has not always been justified: “Every market segment 

has had its disasters and whether a firm does well can come down 

to luck, as well as the competency of GPs and the DNA of the fund.” 

He adds that across the board LPs are reducing the number of PE 

relationships they have, which means it will be harder to reach first 

close and, even more so, final close. “It will be crucial that fund 

targets are of an achievable size and that GPs have the support of 

both existing and new investors,” he says. 

William Gilmore, investment director at Scottish Widows 

Investment Partnership, says he expects there will be some 

consolidation in investment relationships, with LPs feeling they 

don’t necessarily have to be in every fund. “There will be some 

haves and other have nots in the fundraising market, because 

we’re in a period of capital rationing, so some long-term investor 

relationships will fall by the wayside.” 

He adds that if an LP has historically been invested in four very large 

funds it may decide only to invest with two going forward, partly 

because of capital rationing and partly because of a perception that 

the number of transactions executed by larger funds will be smaller 

in the future. 


Here & now 

The BVCA exists to promote venture capital and its interests all of the time. There are, though, 

moments when it is highly opportune to place a special emphasis on the sector and at the 

loudest possible volume. 

We are all aware that the dot com boom and bust has cast a long 

shadow from which it has been difficult for UK venture capital to 

escape entirely. However, there are now real grounds for optimism 

that 2011 will be an especially significant year for the venture 

capital community which will signal the start of a decade of new 

commercial opportunities. 

There are three particular signals which lead us to this assessment. 

The first is the prospect of a series of prominent exits and 

IPOs over the next 12 months which will involve well-known 

companies whose roots are in the support they have received 

from the venture capital sector. The second is the accumulating 

evidence that the United Kingdom is entrenching its role as 


2011: Year of Venture 

Launching a new BVCA campaign 

(Left to right) Simon Walker, CeO, BVCA; richard Anton, Vice Chairman, BVCA; Joanna Shields, vice president, 

eMeA, facebook; and Simon Clark, Chairman of the BVCA’s Venture Capital Committee 

the European hub for venture capital. The third is the evident 

enthusiasm of the coalition government here for expanding the 

venture sector. The most prominent aspect of this has been 

David Cameron’s support for the enhancement of the East 

London Tech City cluster but that headline policy comes with 

numerous other initiatives attached. The Government is right to 

want to champion venture capital and we are pleased that Boris 

Johnson, the Mayor of London, is now set to play a leading part 

in this enterprise as well. 

In that light, the BVCA has designated 2011 as ‘The Year of 

Venture’. The coming 12 months will witness a number of 

high-profile events, meetings and publicity drives. The first of

these was the Inaugural Venture Capital Entrepreneur Lecture 

which took place on January 17th (photos below) where 

Joanna Shields, Vice President, Europe, Middle East and Africa, 

addressed an audience of venture capitalists, portfolio company 

executives, parliamentarians and the media on the future of 

venture capital in Europe. There will be future events in the 

course of the year in co-operation with the Mayor of London’s 

office and an enterprise reception at the House of Commons in 

July. We are also keen to collaborate with student entrepreneurs 

to encourage the emergence of the venture capitalists of the 

future. Other activity will include a monthly series of lunches with 

key external stakeholders and a portfolio company of the week 

It is absolutely vital 

that the themes 

of ‘enterprise’ and 

‘venture capital’ 

become synonymous 

in the minds of 

policymakers. 

highlighted on the BVCA’s website. This is the year in which to 

associate venture capital with the theme of economic growth in 

the short-term and the re-balancing of the UK economy in the 

medium term. 

All of this will, though, only be as effective as the support which we 

receive from the sector itself. The Year of Venture offers venture 

capital the chance to showcase itself anew. It is absolutely vital 

that the themes of ‘enterprise’ and ‘venture capital’ become 

synonymous in the minds of policymakers. It is only if that link is 

understood that Britain can make the sort of economic progress 

in the year and indeed the decade ahead that we would all wish 

to see. 


Q&A 

Q1. You’ve been working in private equity for 15 years 

now. Obviously the industry has changed significantly 

in that time, but what for you are the main differences 

between now and the mid-1990s? 

A. The UK and European private equity markets have become 

significantly more competitive since the mid 90s. To produce 

top quartile returns today, one needs to identify deals where 

there are operational opportunities above and beyond the 

financial engineering and “buyout effects” that sufficed a decade 

ago. Leading private equity sponsors now must have a greater 

understanding of the industries in which they invest as well as 

access to world-class operational capabilities. 

Q2. How has Advent international changed since you 

joined in 1998? 

A. When I joined Advent, we had fewer than 100 deal 

professionals in the firm and now we have more than 160. We 

have also expanded geographically from 11 offices 10 years 

ago to 18 today. Our main buyout fund programmes have also 

expanded with cumulative capital increasing from US$2bn in 

2000 to US$26bn today. 

We strive to continually improve the way in which we do business 

and whilst we essentially have the same buyout and operational 

growth strategy, we are much better resourced. We now have a 

more sophisticated toolkit- the support of our very experienced 

Operating Partners, a specialist debt team, portfolio support 

to provide analysis and management tools for our portfolio 

companies plus the lessons we have learned over the years and 

the huge benefits of global sector coordination. Much energy 

continues to be dedicated to preserving our unique culture of 

collaboration, intellectual honesty, integrity and stewardship that 

has enabled Advent to successfully grow and develop over time. 

Q3. focusing on the last two to three years in 

particular, the recession obviously had a severe impact 

on private equity. How did Advent adjust to the 

changing conditions? 

A. Economies work in cycles and the tactics that you adopt 

need to vary according to the prevailing phase of the cycle. 

We adapt our tactics, but our underlying strategy of looking for 

opportunities to add operational value and to grow companies 

for long term success hasn’t changed. 


with 

Fred Wakeman 

Managing Partner and Head of 

Advent international’s London office 

During 2007, when the market was frothy, we raised funds and 

we exited businesses which were ready to move on to their next 

phase of ownership and development. During the tough two 

years that followed, we focused on our portfolio companies, 

ensuring that they had enough resources to continue to grow 

and support operations. Our deal teams split their time between 

working closely with their portfolio company management teams, 

adapting plans to the new economic environment and looking 

for businesses to invest in. We are a well resourced business and 

this enabled us to maintain the pace of our investments and our 

exits throughout this difficult trading period despite the debt 

markets being very difficult indeed. 

Q4. What do you look for when deciding to invest? 

A. The first question has to be, ‘Is there potential for a good 

operational growth story here?’ 

We spend a great deal of time working within key sectors 

on sourcing proprietary potential deals and extensive due 

diligence. We look for management teams that we can partner 

with who have an interesting growth strategy that they believe 

in. We use our Operating Partners, with their many years of 

specific industry experience, to help us identify where the 

operational opportunities to add value lie and how we can grow 

and develop the business for success both during and beyond 

our ownership. From this work, we develop a very clear growth 

and development ‘story’ for the business and a clear picture of 

the potential value of the business and therefore its price in the 

market today. 

Q5. What lessons do you think the industry should 

learn, or has learnt, from the recession? 

A. Financial engineering is not a successful long term business 

strategy for a portfolio company and private equity, and the 

benefits it brings to businesses and the wider economy, need 

to be more clearly explained. It is not well understood by 

businessmen, politicians, industry commentators or the general 

public and this lack of understanding is even more the case 

outside the UK and US markets. 

Q6. With the decrease in the number of mega-buyout 

opportunities, have you seen, or do you expect to see, 

more competition for assets in the upper mid-market 

space, Advent’s traditional home?

We are size agnostic when we look at deals. We look by sector 

and with a specific eye for operational growth potential. We are 

also particularly adept at complex deals such as carve outs that 

require high levels of operational capability and a good degree 

of planning and patience. Consequently, we meet different 

competitors in different deal situations and in different regions. 

Pricing discipline, supported by extensive due diligence, is critical 

in highly competitive situations. 

Q7. What sectors are Advent particularly focused on at 

the moment? 

A. We focus on five key sectors; business and financial services, 

retail, consumer and leisure, industrial, healthcare and TMT. There 

are a number of opportunities around complex carve outs, buy 

and build and industry consolidation that look interesting at the 

moment and of course geography has a part to play too. We closed 

our largest Latin American fund of US$1.6bn in March 2010 and 

are opening our fourth office in the region of Columbia in 2011. 

Investment 

Foundation course 

14–16 March 2011 

Our programme, aimed at investment professionals with 3 to 18 months experience 

in the venture capital industry, provides a thorough introduction to the industry along 

with the opportunity to network. 

Course sessions include: 

• introduction to VC 

• VC modelling 

• Assessing technology risk 

• entrepreneurs session 

• Due-diligence 

• Transformational growth 

• Legal agreements 

• fund structuring 

great introduction to venture capital, would 

recommend to anyone starting out in the industry. 

Daniel Jones, fidelity growth Partners 

Q8. What is your outlook for the year ahead? 

A. 2011 will still be a tough year. Growth in the economy is likely 

to be flat in mature markets as a result of sluggish consumer 

spending, persistent high unemployment, and increasing 

inflation. As in 2010, price discipline on deals will continue to be 

important as much money will be chasing few deals. 

Q9. if you had just one minute with the man on the 

Clapham omnibus to extol the benefits of private 

equity, what would you say? 

A. Private equity is a force for growth in the economy. Without 

it, many good companies would never reach their potential and 

provide much needed employment and other economic benefits 

to their local communities. Furthermore, private equity is an 

attractive asset class for your pension fund that has proven to 

provide high returns for pensioners. 

SAVe 

20% 

when you book 

by 15 february 

2011 

Investing 

in training, 

enhancing 

returns 

Open to members 

and non-members 

in-house training 

options also available 

For further details please 

contact Leonie Pilgrim or 

Nariah Goldring 

training@bvca.co.uk 

T: +44 (0) 207 420 1823/1814 

CPD Accreditation available with ACCA, BSB, CiSi, iCAeW and SrA. 



Private Equity Services 

Making ESG as simple as ABC 

Let Waterman’s award-winning advisory team steer you 

through the changing Responsible Investment landscape 

There are increasing pressures on both LPs and GPs to 

demonstrate well-defined and implemented Responsible 

Investment Strategies. Talk to an expert who can help 

make sense of these requirements in the context of your 

current and future investments. We can help: 

• Keep track of changing environmental, social 

and governance (ESG) requirements 

• Develop robust and commercially viable policies 

and strategies which meet investor and stakeholder 

expectations while successfully building business 

• Provide tools to assess ESG risks of new 

investments 

• Manage ESG risks and profit-driving opportunities of 

your existing investment portfolio 

• Generate robust reporting metrics to 

demonstrate ESG performance 

• Develop supporting strategies for stakeholder 

communications and reputation building in relation 

to ESG 

For further information or a free consultation meeting, contact: 

Anna Bacon, Director - Environmental Management & Due Diligence 

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t 020 7928 7888

iHealthcare 

Just as Apple revolutionised music consumption, the Government’s plans for the NHS want to do 

something similar by putting the end user in charge. Simon Horner, BVCA, explores what could be 

the biggest shake-up in healthcare provision since 1945. 

When Margaret Thatcher famously declared in 1983 that the NHS 

was “safe in our hands” it was indicative of the limits of radical reform 

– tinkering yes, privatisation no. A health service publically provided 

and free at the point of use is perhaps the last post-war shibboleth 

still standing in modern public policy discourse. It stood in 1983 as 

Thatcher tacked back towards the political centre and it stands true 

today, with David Cameron spelling out his priorities in 2006 in three 

letters, “N-H-S”. Or does it? 

The election campaign was dominated by public spending cuts and 

education reform. Since then welfare reform has also risen up the 

political agenda. But this month sees the publication of a new NHS 

Bill, the biggest in the history of the health service and bigger indeed 

than the one that created it in 1945. In effect it shifts the NHS 

from a system of direct public management to one of competing 

(potentially private) providers. There will be a failure regime for 

hospitals and other services, with no power for the Secretary of 

State to prop them up. Consortia of GPs will be responsible for 

commissioning services. These are far reaching changes that have 

attracted very little attention, so much so that questions are being 

asked as to whether the Coalition even has a mandate for them. 

But the Prime Minister’s speech urges full steam ahead. So what do 

these reforms mean for investment in healthcare? 

A system that doesn’t allow for entry and exit of providers or even 

recycling of healthcare assets will score low marks for implementing 

new and innovative practice and technology. So it is with the NHS. 

At inception, 80% of surgery was in-patient, now it is as low as 20%. 

Yet the assets used are the same. No amount of efficiency drives can 

rescue a service run from outdated assets. There is little scope to 

invest in new and innovative ways of delivering outpatient services 

because we are still wholly committed to our hospital behemoths 

of yesteryear. Competing providers will face not the rigours of the 

market in proving that they can deliver better services for less, but 

‘save our local hospital’ campaigns, driven by local politicians and 

unions. A 2008 report by Westminster think tank Policy Exchange - 

‘All Change Please’ - found that the UK was slower in implementing 

new technologies and practices than our competitor nations, even 

when backed by clear evidence. NHS managers were not measured 

by how innovative they were but whether they met central 

government targets and stayed within their budget. But if this week’s 

reforms deliver what they are suppose to, this could all change. 

‘Any willing provider’ will be the watch words for service delivery 

with GP consortia incentivised to select on grounds of quality and 

cost (the only thing that may not be subject to the rigours of choice 

and competitions is the GPs themselves). As new providers enter the 

market, service delivery could be designed around new technology 

rather than the other way around, with clear incentives to invest 

in healthcare innovation. Different innovations could be applied in 

different areas of the country rather than imposed uniformly giving 

rise to a new sense of localism in healthcare provision. 

Similarly new providers who design a service with the patients’ 

needs and wants in mind rather than trying to retrofit them as an 

afterthought will come to the fore. Shoshanna Zuboff, writing in 

the McKinsey Quarterly, describes an age of ‘distributed capitalism’ 

where instead of asking ‘what do we have and how can we sell it to 

you?’ we ask ‘who are you?’ and ‘what do you need? So just as iTunes 

revolutionised the way we consume music by putting the end user in 

charge, so we must invest in a similar revolution is healthcare. It need 

no longer be about adapting our hospitals to convince users we have 

understood their needs, but rather redesigning the entire delivery 

mechanism around how people want to consume healthcare. 

There are already encouraging signs that such thinking already exists 

at the margins where some private provision already exists. Circle 

Health is a private provider which has delivered 98% consumer 

satisfaction by redesigning outpatient services putting the individual 

in charge. For example, the NHS’s notoriously poor food provision 

has been replaced with an on-site Michelin starred chef because 

that is what people wanted. This might be an extreme example but it 

highlights an emerging trend. As these reforms take root this thinking 

will move from the margins to the mainstream and the investment 

community must ready themselves to keep up with a new cohort of 

healthcare entrepreneurs like those at Circle Health. 

It should be the role of private equity and venture capital to lower 

the barriers to entry for these new providers and models of service 

delivery. With the Labour Opposition apparently against these 

reforms, political risk may way heavy on the minds of would-be 

investors but they should first consider the following: with public 

spending being cut and a demographic time bomb ticking in the 

background, these reforms are no longer ‘nice to haves’, they are 

absolutely essential. It is hard to see how even political ideology can 

row back against this onrushing tide. A concerted effort from the 

investment community could make such a reversal impossible. 


BVCA launches bespoke 

personal insurance facility 

with Chubb Insurance 

BVCA Insurance Services is delighted to announce the launch of a bespoke personal 

insurance facility with Chubb Insurance supported by leading personal lines broker, 

Quantum Underwriting Solutions Plc. Chubb have recently been voted “Personal Lines 

Insurer of the Year 2010” in the Insurance Times Awards, for the eighth time in eleven 

years. Their market-leading Masterpiece policy covers any number of houses, cars and 

possessions under one policy, with one renewal date serviced by a dedicated personal 

account manager at Quantum. 

Individuals within BVCA Member firms can benefit from a free personal consultation, either at home or at work, 

to review whether their current insurance arrangements meet their needs and if not, find a better solution. 

BVCA Members are also offered the exclusive benefit of interest free credit, regardless of premium amount. 

Explaining the reasons behind this initiative Andrew Graham, COO of the BVCA, commented: “Following 

the development of BVCA Insurance Services we continue to explore new partnerships with insurance 

providers to deliver exclusive benefits to our Members. After carrying out extensive market research and 

BVCA Member assisted due diligence, we chose Quantum due to their unwavering commitment to an 

advice and service-led proposition.” 

Simon Mobey, Chubb European Personal Lines Manager, added: “Chubb Insurance is proud to be partnering 

with the BVCA and Quantum on this initiative. Like Quantum, we specialise in serving the insurance needs of 

those with more to protect, and for whom standard products are simply inadequate. Chubb’s service has won 

an unparalleled number of awards, and therefore our product will be the perfect match for the BVCA members 

who rightly demand a bespoke service.” 

Quantum was founded in 2004 and deals only with personal insurance for individuals with more to protect. 

Quantum are Chubb’s largest privately owned niche broker insuring over 1,500 clients covering collective assets 

in excess of £1.5Bn. Quantum is headquartered in Solihull with offices in London and Farnborough. Founding 

director, James Wasdell commented: “We are delighted to partner with the BVCA to offer market leading 

insurance products from a highly rated insurer”. He added: “We have been meeting new clients for six years and 

continue to see wholly inappropriate insurance cover that does not match the client’s lifestyle or asset-base.” 

For more information you can visit www.quantumplc.com/bvca. 

To book your personal consultation you can email bvca@quantumplc.com 

or call Quantum on 0870 402 1900. 

Alternatively contact Nathan Sewell, nsewell@bvca.co.uk 


BVCA Insurance Services is authorised and regulated by the Financial Services Authority

BVCA Portfolio 

Company Management 

Awards 2011 

Nominations are now open for only event that celebrates portfolio management teams. 

For the third year running, the BVCA is hosting one of the most 

important events on the private equity calendar, the Portfolio 

Company Management Awards 2011. 

The purpose of these awards is two-fold. Firstly, it is a chance to 

recognise and applaud the tireless work undertaken every day of 

every year by the management teams of companies backed by 

venture capital and private equity. It is these teams which are 

responsible for the performance of their businesses. It is therefore 

important that the Portfolio Company Management Awards, 

or PCMs for short, exist. Leadership and managerial excellence 

deserve to be celebrated. 

The second reason the BVCA holds such an event is to showcase 

to the wider world – be this government, the media or investors 

– exactly what it is private equity and venture capital does. It is 

an opportunity for the industry to demonstrate why it is good for 

British businesses, and in turn good for British employment and 

good for the British economy. 

With this in mind, the BVCA would like to encourage you to 

nominate any portfolio company which you feel has excelled over 

the past financial year (i.e., from April 1 2010). Nominations are 

now open and close at midnight 4 March. Regional winners will be 

Principal sponsor 

Co-sponsor 

Supporter 

announced in May and will automatically go head-to-head in the 

national finals, the winners of which will be revealed on 30 June 

2011 at an awards ceremony at a top London venue 

For more information and to nominate, pleased head over to 

www.bvcapcmawards.com, and good luck! 

national winners of the PCM Awards 2010 

Category Winner Pe or VC Backer 

Large Buyout Private Equity-Backed 

Management Team of the Year 

Card Factory LDC 

Mid Market Private Equity-Backed 


British Salt LDC 

Venture Capital-Backed Management 

Team of the Year 

International Impact Management 

Team of the Year 

R5 

Pharmaceuticals 

Catapult Venture 

Managers and Biocity 

DiGiCo Matrix Private Equity 

Partners 

Exit Management Team of the Year Pets at Home KKR and Bridgepoint 

Environmental Social and Governance 


OSS Holdings Dunedin Capital Partners 

Corporate Social Responsibility 


Major Impact to Industry – CEO of 

the Year 

Portfolio Company 

Awards 2011 

30 June 2011 

www.bvcapcmawards.com 

United Biscuits The Blackstone Group 

and PAI Partners 

Michael Fort, Lyceum Capital 

Synexus 

Celebrating 

leadership 

& managerial 

excellence 


Country 

Profile 

Despite the size of Russia’s economy, it’s private equity industry punches well below its weight. 

Alexander Pankov of Troika Dialog explains how the Russian Private Equity Initiative (RPEI) aims to 

beef up the market. 

The Russian private equity market represents one of the last untapped 

territories for international investors. Despite almost 20 years of liberal 

reforms and a fairly robust economic growth, the local alternative 

investment industry is still nascent and strikingly small relative to GDP, 

size of the consumer market and population. This phenomenon 

makes Russia an outlier among other BRICs enjoying a steady flow of 

foreign direct investment and a huge interest from global investment 

firms. According to the Emerging Market Private Equity Association 

(EMPEA), private equity penetration in Russia stands at 0.02% lagging 

behind not only India and China (0.32% and 0.13% respectively), but 

also Turkey (0.08%) and MENA (0.11%). 

A turbulent rise of the local market in 2004 to 2008 (first LBOs, first 

US$500m+ funds raised by Baring Vostok Capital Partners, Russia 

Partners, etc.) and cash overhang was followed then by unprecedented 

capital drought and industry deterioration caused by the credit 

crunch. EMPEA figures point out that in 2009 Russia-focused firms 

raised US$455m compared to almost US$4bn accumulated in India 

and close to US$7bn in China. As a result the local private equity 


The Russian 

Private Equity 

initiative 

landscape has changed dramatically. The financial crisis has sparked 

further consolidation of the market, strengthening the position of the 

well-established players and nearly stalling the operations of many 

first-time funds launched prior to the crisis. Debt-laden portfolio 

companies have experienced great difficulties in restructuring and 

the deleveraging process has been extremely painful. 

In this environment many captive fund managers were spun out 

and several institutional investors completely exited the asset class. 

The drastic reshuffle coupled with the scarcity of capital and the 

macro-economic uncertainty of the last few years resulted in a major 

impediment for further development of the local private equity 

industry. In 2009 total investments made by institutional funds were 

well below US$300m, according to our estimates. 

As a preliminary step to address these challenges and misperceptions 

the Russian private equity community has reached a broad consensus 

to join forces and improve the local private capital market. A group 

of 15 leading GPs and service providers launched the Russian Private 

Equity Initiative (RPEI) in the middle of last year as part of the 

industry-wide effort to promote the Russia private equity asset class 

domestically and internationally. 

The four main goals of the RPEI: 

• Raise awareness of private equity among Russian institutional 

investors (predominately public and corporate pension schemes, 

insurance companies, banks and sovereign entities) 

• Create a more favourable legal environment for raising capital, 

investment and management of private equity domiciled both in 

Russia and other jurisdictions 

• Promote Russian private equity in the global LP/GP community 

and enhance its market position among other emerging 

economies 

• Set standards of professional conduct in corporate governance, 

reporting and SRI, improving industry-specific business education 

and professional qualifications 

A critical element of this initiative is the Russian Private Equity 

Performance Survey the RPEI has launched with Thomson Reuters,

which will collect comprehensive and reliable data from the entire 

industry in order to move towards building an efficient capital market. 

The first results of this study will be available in the middle of 2011 in 

the form of an IRR index, which will serve as the official benchmark of 

our industry. This effort is aimed at making the Russian market more 

transparent and comparable to other key private equity destinations. 

RPEI is actively involved in the interaction with local asset allocators, 

regulators and entrepreneurs in addition to collaborating with leading 

international media groups and investment consultants serving 

as major distributors of the industry-specific data. The group also 

publishes the Russian Private Equity Magazine, the first of its kind in 

Russia specifically for the local private equity sector and acting as the 

official voice for the industry. 

The RPEI also hosts the annual Russian Private Equity Congress 

in partnership with other key organisations in Russia which has 

become a successful platform for facilitating dialogue between the 

opinion-leaders and key decision-makers in the Russian finance and 

government worlds. In much the same way, the RPEI is also partner 

ing with the BVCA (along with the Russian Venture Capital Association 

and the Russian Venture Company) and will host a forum in London 

on 22 March which is part of the BVCA International Series and 

hopes to strike a dialogue with international institutional investors 

based in Western Europe, British GPs and policymakers. 

In the recent years the federal government has acknowledged the 

necessity of improving the Russian investment climate and already 

made a number of important steps in fostering international 

technological cooperation and investments. As private equity plays a 

BVCA at the Wimbledon 

Championships 2011 

crucial role in unlocking the entrepreneurial potential there is a clear 

understanding among all key stakeholders and market participants 

that interests of public and private sectors shall be aligned in respect 

to the development of the local private equity market. 

All of this lays the foundation for the establishment of the National 

Alternative Investment Management Association (NAIMA) in Russia, 

the trade body that will be instituted in 2011 to represent the 

interests of the industry in its interaction with regulators and other key 

stakeholders. The same way BVCA and EVCA have led the industry’s 

response and campaign against the more detrimental portions of the 

Alternative Investment Fund Managers Directive, NAIMA and the 

RPEI hope to make the case for strong local capital markets industry. 

Despite being in an embryonic stage of its development Russian 

private equity industry is poised to be an attractive target region 

for global investors. The largest consumer base in Europe, stable 

political regime and fiscal policy, commitment of the government 

to decline its shareholding in the economy through a massive 

US$60bn+ privatisation effort – all this makes the Russian market a 

compelling value proposition in the long run. If Russian policy-makers 

can consolidate and empower the nation to a gradual and consistent 

transformation, then investments in Russian private equity will prove 

to be extremely successful. The RPEI, together with other key industry 

players within Russia, will be the force that sees this through. 

For further information regarding the Russia Private Equity Initiative 

(RPEI) or the BVCA International Series and the upcoming Russian 

Forum in London on 22 March 2011, please contact Kawika Solidum, 

BVCA: ksolidum@bvca.co.uk. 

We are pleased to host the third annual BVCA day at Wimbledon. This promises to be yet 

another successful day of networking, combined with an excellent day of tennis at the 

Wimbledon Championships. The event will take place on Tuesday 21 June 2011 

and is open to BVCA members, their guests and other non-members. 

Join BVCA members on Centre Court or Court No 1 to enjoy a day of first rate tennis from the world’s greatest competitors. 

This event is open to BVCA members, non-members and guests and tickets are competitively priced. 

Find out more at: http://www.bvca.co.uk/events/Wimbledonno1. 

for further information and to discuss your requirements, 

please contact Tommy Nguyen, Commercial Manger, tnguyen@bvca.co.uk. 


Public 

Policy 

Update 

Coalition Politics 

This year promises to be a difficult one for the Government. 

The consequences of the Comprehensive Spending Review 

will become all too real for some people and relations within 

the Coalition much more fractious as a result. Indeed we 

have already seen signs of discontent within the Coalition and 

rioting on the streets during the passage of measures to raise 

tuition fees. Expect more of the same, particularly the former 

if the motion to introduce the new Alternative Vote system is 

defeated in May’s referendum. 

Yet both Coalition partners are playing the long game. They are 

banking on delivering economic growth over a five year period and 

banking on all else paling into insignificance if they are successful. 

As such this year’s Budget will not be about fiscal consolidation 

but about growth. This represents a window of opportunity for 

the private equity and venture capital industry. 

The Government has recognised that the arteries of bank finance 

are clogged with uncertainty and risk aversion and are looking 

for alternative sources of capital to help grow the UK economy. 

We must rise to this challenge by putting forward our policy 

ideas and better communicating our existing contribution to 

economic growth so that we can enlist the Government’s support 

in delivering a competitive system of tax and regulation. 

The window of opportunity to do this is now. If you would like 

to contribute to the BVCA’s 2011 budget submission then please 

contact BVCA public affairs manager Simon Horner at shorner@ 

bvca.co.uk 


An update on the latest public policy issues and their 

impact on private equity and venture capital 

green investment 

Bank 

As announced in the Comprehensive Spending Review, the 

Green Investment Bank (GIB) will be capitalised with £1bn of 

public money, with additional funds to come from the private 

sector and asset sales. However before we get carried away 

talking about how much there will be to invest in greening our 

economy, the final form and function of the GIB is yet to be 

decided. 

An important debate is now taking place in Whitehall to discuss 

how the bank will operate and whether it will be strictly speaking 

a bank (as opposed to a fund). We have seen this debate spill out 

onto the pages of the national press, notably in the Guardian 

with Energy Secretary Chris Huhne supporting a bank model and 

pitching himself against Treasury ministers and officials dragging 

their feet. 

In her testimony to the Environmental Audit Committee, 

Economic Secretary to the Treasury Justine Greening remained 

open to either possibility. Members of the Committee, including 

noted environmental campaigner Zach Goldsmith, accused her 

of attempting to neuter the bank model and expressed concern 

for continued Treasury involvement in what they saw as a 

Department of Energy and Climate Change policy issue. 

The BVCA has expressed a preference for the bank model over 

the fund. However we do understand that were the GIB to have 

bond issuing powers, some Treasury involvement is necessary 

and inevitable. It is also important to keep in mind the Coalition’s 

overall deficit reduction strategy which impacts on BVCA 

members in the broadest sense and also enjoys our backing 

- any possible bond issuance from the GIB takes place in the 

context of this debate. That said, if it is at all possible to square 

this circle then every effort should be made to do so, particularly 

if we are to raise anything like the £550bn demanded by the 

independent GIB Commission.

AifM Directive 

The BVCA Regulatory Committee this month submitted our response to the Committee 

of European Securities Regulators (CESR) call for evidence on implementing measures for 

the Alternative Investment Fund Managers Directive (AIFMD) – the next key stage in the 

process. There are numerous Delegated Acts to work through with much still to play for 

and we will continue to push for sensible interpretations on all of our key issues, at both 

Commission level and to make sure there is no sense of ‘gold-plating’ by the FSA. 

Furthermore, we recently saw the creation of ESMA, the new markets supervisory 

authority (to supersede CESR), which now has responsibility for AIFMD and regulation of 

our industry more generally. It will be vital that we secure a significant UK presence within 

ESMA and a significant private equity and venture capital presence in an advisory capacity. 

These were the key messages put forward by CEO Simon Walker when giving evidence 

to the Treasury Select Committee in December and he urged questioners to put similar 

points to Commissioner Barnier when he testified a week later. Policy leads have been 

apportioned to national regulators and it is important that the UK will be responsible for 

transparency (leverage) though we will need to keep a close eye on depositories as the 

policy lead has gone to France (completing the quartet are Germany with responsibility 

for authorisation and Ireland for scope). 

The FSA has also convened six working groups to study the detail of the various provisions 

and the BVCA has successfully nominated individuals to all of those groups. The European 

Commission is still looking at implementation in early 2013 though this looks to be a very 

optimistic timetable. Nevertheless we will continue to work with all the key stakeholders 

to bring a speedy end to a process that has produced so much investor uncertainty. 

Takeover Panel 

At the end of October the UK Takeover Panel published its response to a wide-ranging 

consultative review of UK takeover rules and issues. Whilst the proposals are still in outline, 

in many areas the proposed changes are significant and could have a considerable impact 

on the private equity industry. The key issues include: 

• Break fees and other inducement fees will no longer be permitted. 

• Potential bidders will have to be publically named in any ‘possible offer’ announcements. 

• Greater disclosure will be necessary as bidders must reveal details of their financing and 

advisory fees. Each party must also provide estimates for advisory and financing fees. 

The BVCA urges member firms which may be affected to write to the Panel to express 

their dismay at the negative impact these changes will have on takeover activity and more 

importantly on shareholder value. A template letter is available on request. 

BVCA consultation responses 

BVCA 

Post-election 

Breakfast 

Briefing 

As 2010 drew to a close, so did one 

of the BVCA’s most successful events: 

the Post-Election Breakfast Briefing 

Series. Between June and December, 

the BVCA, in partnership with Baker 

& McKenzie who kindly supplied the 

venue, held a series of speeches from 

distinguished political and economic 

commentators offering their expert 

insights across a wide range of themes. 

Tim Hames – former leader writer at 

the Times and then special adviser 

to the Speaker of the House of 

Commons, and now at the BVCA – 

kicked off the series with a talk about 

how a Coalition Government is likely 

to work. The next saw Brian Groom, 

business & employment editor at the 

Financial Times, give his thoughts 

on the British economy, and then 

Julian Astle, director at liberal think 

tank Centreforum, gave the Liberal 

Democrat perspective on the future 

of the Coalition. In November, the 

BVCA’s Colin Ellis, chief economist, gave 

an overview of the macro-economic 

situation, before proceedings were 

wrapped up in December by Rt Hon 

Peter Riddell, a senior fellow of the 

Institute for Government and former 

political commentator for the Times. 

This is not the end of the story. The 

BVCA along with our partners Baker 

& McKenzie will be producing a white 

paper based on the series in February. 

For more information please contact 

Leon De Bono, +44 (0)20 7420 1853, 

ldebono@bvca.co.uk. 

The BVCA’s technical committees have responded to a number of consultations in recent months, ensuring the industry remains active 

in policy discussions. Recent submissions include: 

• The Department of Energy and Climate Change consultation on simplifying Carbon Reduction Commitments 

• BIS Consultation on the long term future of corporate Britain 

• ESMA call for evidence on AIFMD Level II 

• Science and Technology Select Committee enquiry into Technology and Innovation Centres 

All of these are available to view on the BVCA’s website: http://www.bvca.co.uk/Newsroom/Government-submissions. 


LP Seminar 

5–7pm 

12 October 2011 

London (venue TBC) 

This unique event hosted 

and developed by the BVCA 

Limited Partner (LP) Advisory 

Board will discuss topics that 

are at the forefront of the 

debate regarding the outlook 

for Europe’s private equity and 

venture capital industry. 

To facilitate candid and 

thorough discussion, attendance 

is strictly reserved for LPs: 

pension funds, foundations, 

endowments, family offices and 

fund-of-funds. 


DAteS 

for your Diary 

This Autumn, three of the industry’s flagship events will be held 

in London. You can reserve your place today by contacting the 

BVCA Events team and registering your interest. 

BVCA LP–GP 

Dinner 

7–10.30pm 



Taking place after the Seminar, 

the BVCA LP–GP Dinner will 

commence for the most senior 

general practitioners from 

BVCA member firms and the LP 

community. 

The evening’s agenda is 

carefully constructed to 

facilitate first-class networking 

and knowledge-building 

opportunities. 

BVCA Summit 

A World of Opportunity; 

Everything you need to know. 

Everyone you need to meet. 

In one day. 



Europe’s premier one-day 

private equity and venture 

capital conference returns 

for a third year in London this 

Autumn. Bringing together 

industry professionals, investors, 

advisors, government, officials, 

MPs, media and academics, the 

Summit is a comprehensive day 

offering invaluable networking 

and the opportunity to debate 

the key issues facing the 

industry. 

To find out more about 

any these flagship events 

contact the BVCA Events 

team at: 

e: kgauzel@bvca.co.uk 

t: +44 (0)20 7420 1824

industry 

index 

The real reasons 

to invest in 

private equity 

‘The real reasons to invest in private equity’, 

is a study by Oliver Gottschalg at HEC Paris. 

This study uses data from 701 mature 

buyout funds, based in the US and EU, with 

an aggregate size of US$360bn. It uses a 

modified internal rate of return (MIRR), which 

makes assumptions about the financing 

and re-investment rates that funds face: in 

particular, cash inflows are re-invested at 

the annualised rate of market return over 

the remaining life of the fund, and outflows 

are financed at the annualised market 

return over the life of the fund so far. These 

assumptions are important when calculating 

MIRRs, but the authors’ sensitivity analysis 

suggests that they are not critical in terms of 

his broad results. 

Gottschalg decomposes MIRRs in a similar 

way to the BVCA-funded paper (Private 

Equity Fund Level Return Attribution: 

Evidence from UK Based Buyout Funds), 

although he splits timing and industrymatching 

into two separate categories, 

giving five in total. 

Using the whole sample, Gottschalg finds an 

average buyout MIRR of 7.6%, compared with 

an industry-matched leveraged return of 

6.8%, indicating alpha of just 80bps. Although 

this is statistically significant, the author 

notes that it probably does not compensate 

for illiquidity and unpredictability. However, 

the paper also finds that top-quartile 

funds deliver a higher MIRR of 13.6%, and 

significantly outperform equally risky public 

market investments, which return 8.5%. This 

alpha estimate of 510bps is statistically (and 

economically) significant. Finally, the author 

then uses a modelling strategy to try to 

identify future top performing funds. 

endowments and the financial crisis 

Private colleges have increased their allocation to alternative investments steadily over the 

past 20 years, owing to good returns seen pre-2009. However, the financial crisis hit and 

college endowments suffered negative returns during 2009, leading to questions about the 

attractiveness of the asset class and the increasing allocations to it. 

‘The Impact of Alternative Investments on Private Colleges’ Endowment Investment 

Returns’ by Donald L. Basch at Simmons College finds that an increased allocation to 

alternatives did lead to a decline in private colleges’ investment returns in 2009. Yet the 

full impact on these returns is perhaps smaller than it is perceived to be; evidence for the 

ten-year period ending 2009 shows that this emphasis on alternative investments tends to 

significantly increase colleges’ cumulative investment return. 

How exchange rates affect returns 

The question of whether currency fluctuations have an impact on private equity returns 

was examined in a recent BVCA Research Note (www.bvca.co.uk/research). Using data 

from 470 PE funds invested by UK managers in the past 30 years, the study converted 

the individual cash flows from these funds into sterling, dollar and euro denomination. 

Benchmarking the resulting returns against each other, the study found that exchange 

rates appeared to have little major impact on returns over the long term, a result borne 

out by repeating the process using the Purchasing Power Parity (PPP) measure. 

The note found, however, that on a three-year IRR horizon, exchange rates did play a 

significant role on the returns of sterling compared to dollars and euros. Given the 

fluctuations in currency seen during the recent financial crisis, and the significant 

depreciation of sterling in 2008, this is perhaps unsurprising. 

end of year cheer 

December saw the publication of the BVCA‘s Third Annual Report on the Performance of 

Portfolio Companies, produced by Ernst and Young. The report looks at a population based 

on the latest annual audited reports of the 43 portfolio companies owned by PE firms that 

are voluntarily subject to the Walker Guidelines on transparency and disclosure. 

The report finds that the year-on-year growth rates in revenue and profits slowed from 

previous years, but remained positive in the range of 3-4%, on both measures of organic 

growth and bolt-ons. Further, benchmarking against both UK economy labour statistics 

and the FTSE All-Share Index, PE companies outperformed on almost all metrics, with only 

operating capital employed within PE portfolio companies (-3.9%) being lower than the 

comparable sector-weighted FTSE numbers (5.6%). 

Whilst the report found that PE-backed portfolio companies were affected by the recession 

- performance in 2009 was down compared to 2008 performance metrics – the news that 

they continued to outperform their publicly quoted peers was welcomed by the buyout 

community. 

Staying power 

PE-backed buyouts are observed to have fewer early exits within 12 months and less 

liquidations than their pure, non PE-backed counterparts. This is the key finding from 

a recent study – ‘Staying Power of UK Buyouts’ – by Ranko Jelic at the University of 

Birmingham. Using a dataset spanning 1966-2004 and covering 1,089 deals worldwide, 

the study found that the total number of early exits across all buyouts has declined over 

time. However, the PE-backed subsample exhibited lower levels of early exits compared 

with the non PE-backed subsample. The study also found that only 2% of PE-backed 

buyouts resulted in liquidations, which is lower than the average for the whole sample 

and the failure rate of 3% for all UK private companies. 


Market 

Statistics 

UK private equity 

raised £5.8bn last year 

according to Thomson 

Reuters, up more than a 

£1bn from 2009 which 

saw £4.6bn committed. 

Globally, the picture is 

similar, with the industry 

raising more last year 

than it did in 2009 – 

from £94bn to £107bn. 


fUnDrAiSing 

UK Quarterly Pe fundraising 

Amount raised (£bn) 

Amount raised (£bn) 

16 

14 

12 

10 

8 

6 

4 

2 

0 

90 

80 

70 

60 

50 

40 

30 

20 

10 

0 

7.3 

Q1 

2007 

55.6 

Q1 

2007 

9.1 

66.6 

5.0 

52.6 

11.7 

79.4 

14.1 

global Quarterly Pe fundraising 

85.7 

3.0 

69.7 

3.6 

59.3 

6.3 

Q2 

2007 Q3 

2007 Q4 

2007 Q1 

2008 Q2 

2008 Q3 

2008 Q4 

2008 

49.2 

Q2 

2007 Q3 

2007 Q4 

2007 Q1 

2008 Q2 

2008 Q3 

2008 Q4 

2008 

2.8 

Q1 

2009 

36.9 

Q1 

2009 

1.2 

Q2 

2009 

29.2 

Q2 

2009 

0.2 

Q3 

2009 

16.9 

Q3 

2009 

0.4 

Q4 

2009 

10.7 

Q4 

2009 

2.2 

Q1 

2010 

30.0 

Q1 

2010 

1.0 

Q2 

2010 

27.3 

Q2 

2010 

1.3 

Q3 

2010 

24.5 

Q3 

2010 

1.2 

Q4 

2010 

Source: Thomson Reuters ThomsonOne 

24.9 

Q4 

2010 

Source: Thomson Reuters ThomsonOne

2010 UK Pe fundraising by Stage focus 

Amount raised (£m) 

1600 

1400 

1200 

1000 

800 

600 

400 

200 

0 

Generalist 

1357.3 

1 

Secondary 

funds 

1298.7 

7 

Buyouts 

1129.1 

2010 global Pe fundraising by Stage focus 

Net period amount raised (£m) 

35,000 

30,000 

25,000 

20,000 

15,000 

10,000 

5,000 

0 

12,981.1 

178 

Balanced 

stage 

113 

4 

875.1 

Mezzanine 

stage 

168 

Balanced 

stage 

Net period amount raised (£m) Number of funds 

6 

432.7 

3 

Fund of 

funds 

406.8 

2 

Early 

stage 

185.3 

1 1 1 

88.9 

Turnaround/ 

Distressed debt 

25.5 1.9 

Energy Seed 

stage 

January 2011 BVCA Briefing 27 

8 

7 

6 

5 

4 

3 

2 

1 

0 

Number of funds 

Source: Thomson Reuters ThomsonOne 

Net period amount raised (£m) Number of funds 

58 

44 

50 

47 

60 

34 

31 

40 

14 

9 

26 

15 

20 

0 

Energy Early 

stage 

Fund of 

funds 

Buyouts Later 

stage 

Mezzanine 

stage 

Other 

private equity 

Generalist Real 

estate 

Seed 

stage 

Secondary 

funds 

Turnaround 

5,281.7 

4,500.1 

6,507.0 

31,894.3 

3,242.4 

7,184.5 

3,394.3 

3,585.6 

8,204.8 

999.3 

7,554.5 

11,389.5 

200 

180 

160 

140 

120 

100 

80 

Number of funds 

Source: Thomson Reuters ThomsonOne

number and Aggregate Value of global Pe Deals 2010 

Number of Exits 

Percentage Deals 

100 

300 

250 

200 

150 

100 

50 

90 

80 

70 

60 

50 

40 

30 

20 

10 

0 

0 

Q1 

2006 

Q2 

2006 

3 

4 

20 

23 

47 

Number of deals 

global number of Pe-Backed exits by Type and Aggregate exit Value: Q1 2006 – Q4 2010 

Q3 

2006 

Q4 

2006 


Q1 

2007 

Q2 

2007 

4 

26 

3 

7 

7 

53 

Aggregate value of deals 

number and Aggregate Value of global Pe Deals by Value Band 2010 

Percentage Deals 

100 

90 

80 

70 

60 

50 

40 

30 

20 

10 

0 

6 

9 

9 

20 

55 

Number of deals 

46 

12 

24 

12 

6 

Aggregate value of deals 

Q3 

2007 

Q4 

2007 

Q1 

2008 

Q2 

2008 

Buyout 

Add-on 

Growth 

capital 

Recapitalisation 

Public to private 

PIPE 

Q3 

2008 

Q4 

2008 

Source: Preqin 

< US$100m 

US$100m – US$249m 

US$500m – US$999m 

US$250m – US$499m 

> US$1bn 

Source: Preqin 

IPO 

Restructuring 

Sale to GP 

Trade sale 

Aggregate exit 

value US$bn 

Q1 

2009 

Q2 

2009 

Q3 

2009 

Q4 

2009 

Q1 

2010 

Q2 

2010 

Q3 

2010 

Q4 

2010 

80 

70 

60 

50 

40 

30 

20 

10 

0 

Aggregate Exit Value: US$bn 

Source: Preqin

The BVCA Transaction Tracker is (a) a list of venture capital and private equity deals involving UK 

targets and (b) a record of those deals completed by UK-headquartered firms outside of the country 

(excluding those firms which invest solely outside of the UK, such as emerging market funds). 

The investments listed below took place between 29 October 2010 and 13 January 2011. 

Data provided by Thomson Reuters. 

UK private equity deals 

investment 

date 

Transaction 

tracker 

Company name Location Business description investors 

29/10/2010 i-plas Halifax Manufactures recycled plastic products Foresight Group 

01/11/2010 Lumison Newbridge Provides connectivity, hosting and managed IT services Bridgepoint Development Capital 

01/11/2010 National Fostering Agency Uxbridge Provides foster care services Sovereign Capital 

01/11/2010 Shetland Wind Power Lerwick Provide wind power installation services Nevis Capital 

03/11/2010 Euroffice London Retails office products and services to the SME market through 

online 

03/11/2010 Nigel Wright Consultancy Newcastle Provides recruitment services Baird Capital Partners 

Darwin Private Equity, Undisclosed Investor 

04/11/2010 BDO Investment Management London Provides financial and investment advisory services Oakley Capital Investment 

05/11/2010 High Speed 1 London Owns and operates railway infrastructure and stations Borealis Infrastructure Management, Inc,Ontario Teachers' Pension 

Plan 

05/11/2010 IECHP (UK and Eire) Scotland Develops fuel cell power system Scottish Enterprise 

08/11/2010 G-volution Newport, Gwent Provides fuel efficiency technology Finance Wales, Undisclosed Investor,Undisclosed Investor 

08/11/2010 SenseLogix Conwy Manufactures enterprise-wide energy reduction products Beringea, Finance Wales, Undisclosed Investor 

08/11/2010 Sirigen Hampshire Provides fluorescent labeling and amplification technology Undisclosed Investor,IQ Capital Partners 

08/11/2010 Xeros Rotherham Develops a prototype washing machine Enterprise Ventures,Entrepreneurs Fund Management, IP Group, 

Undisclosed Investor 

09/11/2010 RDL Corporation London Operates as an employment agency Matrix Private Equity Partners, Undisclosed Investor 

09/11/2010 Staff Management Sevenoaks Provides live-out care service to children and adults August Equity 

11/11/2010 Eversholt Rail Group London Provides rolling stock and management services for railways 3i Infrastructure, Morgan Stanley Private Equity,STAR Capital 

Partners 

11/11/2010 Movirtu London Provides mobile technology solution Gray Ghost Ventures,TLcom Capital 

11/11/2010 Procarta Biosystems Norwich Develops technology to defeat antibiotic-resistant superbugs Javelin Ventures,Midven,Morningside Venture Investments 

11/11/2010 Syntaxin Abingdon, Oxon Develops drugs to treat neurological, respiratory, and metabolic 

diseases 

12/11/2010 Durham Graphene Science Durham Operates as a research and development firm to produce 

graphene 

Abingworth Management,Johnson & Johnson Development 

Corporation,Life Sciences Partners BV,Quest Management NV,SR 

One,Seventure Partners SA,Lundbeckfond Ventures 

North East Finance 

12/11/2010 Vertical Wind Energy Ponteland Develops and installs vertical axis wind turbines Finance South East,North East Finance,Undisclosed 

Investor,Clarendon Fund Managers 

16/11/2010 Pulse Staffing Hertfordshire Provides temporary/permanent staffing solutions to the 

healthcare sector 

Blackstone Group 

17/11/2010 Choice Care Group Reading Provide learning disability support services Sovereign Capital 


Transaction tracker: UK private equity deals 

19/11/2010 KemFine UK Grangemouth Manufactures chemicals for agriculture and pharmaceutical 

sectors 


Aurelius AG 

22/11/2010 Britax Excelsior Limited Andover, Hampshire Manufactures children's car seats, pushchairs and travel systems Nordic Capital 

22/11/2010 iprism Underwriting Agency London Develops electronic insurance trading platform Magenta Partners 

22/11/2010 Ubisense Trading Cambridge Develops real-time location systems Canaccord Genuity,Undisclosed Investor 

23/11/2010 Handmade Mobile Entertainment London Handmade Mobile provides consumer applications for mobile 

phones 

Oxford Capital Partners 

23/11/2010 MyThings (UK) London Operates as an online personalized retargeting company Accel Partners,Carmel Ventures,T-Venture Holding,Undisclosed 

Investor 

23/11/2010 Xention Cambridge Operates as a drug discovery company focusing on ion channels BTG International,Credit Agricole Private Equity,Forbion Capital 

Partners,MVM Life Science Partners,Seroba Kernel Life Sciences 

24/11/2010 Advent Life Sciences London Manages a venture capital and private equity fund European Investment Fund 

24/11/2010 Aquamarine Power Edinburgh Operates as a marine energy company Undisclosed Investor 

24/11/2010 Iroko Financial Products London Provide fixed income banking services TLG Capital 

25/11/2010 Icera, Inc Bristol Develops electronic processors Accel Partners,Amadeus Capital Partners,Atlas Venture,Balderton 

Capital Management 

25/11/2010 Time Out Group London Operates as a publishing company Oakley Capital Investment 

26/11/2010 Cambridge Broadband Networks Cambridge Develops technology for broadband wireless networks Accel Partners,Adara Venture Partners,Amadeus Capital 

Partners,Samsung Venture Investment Corporation,TVM Capital 

01/12/2010 Indigix Oxford Provides research and development services Imperial Innovations,Undisclosed Investor 

01/12/2010 Survitec Group Belfast Survitec Group manufactures safety and survival equipment Warburg Pincus 

02/12/2010 Asperity Employee Benefits London Provide integrated employee benefits Inflexion 

02/12/2010 Building Automation Solutions Altrincham Develops building energy management systems Bridgepoint Development Capital,Undisclosed Investor 

02/12/2010 Oakland Care Centre Birmingham Operates as a care centers for dementia patients Albion Ventures 

02/12/2010 Polestar Foods Leamington Spa Produces frozen desserts Privet Capital 

06/12/2010 Biotec Services International Limited Bridgent Provides pharmaceutical services Finance Wales, Undisclosed Investor 

06/12/2010 CitySprint (UK) Redhill, Surrey Provides courier services Dunedin Capital Partners 

06/12/2010 IMS Group, The London Provides consulting and business support services to securities 

industry 

Sovereign Capital 

07/12/2010 Gym Group, The London Operates a chain of fitness clubs and gyms Bridges Ventures 

07/12/2010 zonzoo group Mitcham Provides mobile phone recycling services StoneMan,Undisclosed Investor,Cleantech Invest 

08/12/2010 CitySocialisingcom London Operates a social networking website PROfounders Capital,Undisclosed Investor 

08/12/2010 Diverse Energy Limited Slinfold, West Sussex Develops low-carbon mobile phone tower technology Octopus Ventures 

08/12/2010 Performance Horizon Group Boldon Colliery Provide performance marketing technology DN Capital 

10/12/2010 Attraction World Birmingham Provides ticket reservation services Maven Capital Partners UK, Undisclosed Investor 

10/12/2010 Tayside Flow Technologies Dundee Tayside Flow Technologies develops cardiovascular devices Braveheart Ventures,Undisclosed Investor,Scottish 

Enterprise,Undisclosed Investor 

11/12/2010 Tyrrells Group Holdings Leominster Produces hand fried potato chips in the UK Langholm Capital 

13/12/2010 Bourn Hall Clinic Cambridge Provides medical services TVM Capital GmbH 

13/12/2010 Cawood Scientific Group Cawood Provides analytical testing services to land based industries Northern Venture Managers Limited,Undisclosed Investor 

13/12/2010 Faversham House Group South Croydon Operates as a media company Matrix Private Equity Partners, Undisclosed Investor 

14/12/2010 Asalus Medical Instruments Limited Cardiff Manufactures surgical devices Finance Wales, IP Group, Undisclosed Investor 

14/12/2010 Dr J D Hull & Associate St Mellons Operates a chain of dental clinics throughout UK AXA Private Equity SA 

14/12/2010 NGenTec Edinburgh Manufactures direct drive permanent magnet generators Scottish Enterprise,SET Venture Partners 

14/12/2010 TynTec Isle of Man Provides mobile messaging services Iris Capital Management 

15/12/2010 Bladon Jets (UK) Limited Ellesmere Develops micro gas turbine engines for hybrid cars Oxfordshire Investment Opportunity Network 

15/12/2010 PsiOxus Therapeutics London Operates as a biotechnology company Imperial Innovations,Undisclosed Investor,West Midlands 

Enterprise 

15/12/2010 Zoopla London Operates a destination website for UK residential property data Atlas Venture,Octopus Ventures,Undisclosed Investor 

16/12/2010 AVISA Aviation Safety Systems Barcombe Provides aviation airworthiness and safety management services ENEX Group SA 

16/12/2010 L M Funerals Wolverhampton LM Funerals provides funeral services Sovereign Capital 

16/12/2010 OFFICE London Operates a chain of footwear stores Silverfleet Capital 

16/12/2010 South East Water Limited Snodland, Kent Provides drinking water supply services CDP Capital - Technology Ventures 

17/12/2010 Chargemaster London Develops electric vehicle charging stations Braveheart Ventures 

17/12/2010 Longbow Real Estate Capita London Provides mezzanine finance and debt Intermediate Capital Group

Transaction tracker: UK private equity deals 

20/12/2010 Chemigraphic Crawley Manufactures and develops printed circuit boards RJD Partners,Undisclosed Investor 

20/12/2010 Crysalin London Develops technology for protein structure determination IP Group, Oxford Technology Management,Undisclosed Investor 

20/12/2010 Engensa London Supplies and installs solar power system Albion Ventures 

21/12/2010 Alexandalexacom London Operates as an online retailer of children's clothes MMC Ventures 

21/12/2010 President Engineering Group Limited Sheffield Manufactures and wholesales safety solutions for industrial 

sector 

non-UK private equity deals by UK firms 

investment 

date 

Company name Location Company description investors 

17/11/2010 GameGround United States Novel TMT Ventures,Sequoia Capital,SoftBank Capital,Vodafone 

Ventures 

17/11/2010 ZONARE Medical Systems United States Apposite Capital LLP,Earlybird Venture Capital,Frazier Healthcare 

and Technology Ventures 

Operates a personalized online gaming center. 

Develops ultrasound imaging devices. 

19/11/2010 SensorTran United States Advantage Capital Partners,WHEB Venture Partners Develops fiber optic-based sensors. 

22/11/2010 Tolven United States Reed Elsevier Ventures Provides an open source, clinical informatics platform. 

23/11/2010 nlyte Software United States Balderton Capital Management,NGEN Partners,Undisclosed 

Investor 

30/11/2010 Abiquo United States Balderton Capital Management,Kreos Capital,Nauta 

Capital,Undisclosed Investor 

Provides data center management solutions. 

Develops an open-source cloud-computing software platform. 

06/12/2010 Banco BTG Pactual Brazil J.C. Flowers & Co.,RIT Capital Partners Provides investment banking services. 

07/12/2010 ESTECH United States NBGI Private Equity, Ltd.,Saints Ventures,Telegraph Hill 

Partners,Tullis Health Investors 

Develops and sells products for minimally invasive cardiovascular 

surgery. 

13/12/2010 Mobixell Networks United States Escalate Capital,Intel Capital,smac partners,Azini Capital Partners Develops mobile multimedia and advertising solutions. 

15/12/2010 Bumble Bee Foods United States Lion Capital Operates manufacturing facilities. 

20/12/2010 Siesta Logistics India Alchemy Partners Provides logistics services. 

04/01/2011 SCVNGR United States Balderton Capital Management,Google Ventures,Highland 

Capital Partners 

Undisclosed Investor,YFM Group 

21/12/2010 Provesica Limited Pampisford, Cambridge Operates as a drug development company Forbion Capital Partners,Seroba Kernel Life Sciences 

21/12/2010 Sky-hook Screen and Digital Print Cardiff Operates as a shell scheme company and exhibition contractor Finance Wales, Undisclosed Investor 

22/12/2010 Kognitio Bracknell Provides analytic database services Corporate Finance Partners CFP Beratungs 

22/12/2010 Recite Me Tyne and Wear Develops software for dyslexic and visually impaired users North East Finance 

29/12/2010 OpenGamma London Develops analytics and risk management software solutions Accel Partners,FirstMark Capital 

31/12/2010 Apex Linvar Milton Keynes Manufactures adjustable pallet racking solutions and shelving 

systems 

Saints Chamonix 

31/12/2010 Caldicot Metal Decorating London Provides printing services on tinplate and aluminum sheet Saints Chamonix 

31/12/2010 Intellident Stockport Provides self-service and stock management solutions Saints Chamonix 

31/12/2010 Leafield Environmental Corsham Manufactures litter, recycling and street furniture products Saints Chamonix 

31/12/2010 Regain Polymers Castleford Recycles post-use rigid plastic into specified recycled compounds Saints Chamonix 

31/12/2010 Westler Foods Malton Operates hot dog stands and produces canned food products RCapital Partners 

04/01/2011 M&C Energy Group Fife Operates as an independent energy consultancy company Lyceum Capital Partners 

05/01/2011 Automated Systems Group Cambridge Provides and supplies printing and copying services Matrix Private Equity Partners, Undisclosed Investor 

05/01/2011 Exploration Logistics Group Mitcheldean Provides remote site medical, health, safety and mine clearance 

services 

MML Capital Partners 

06/01/2011 Dene Group, The Newcastle Upon Tyne Produces film and television programmes NEL Fund Managers,Undisclosed Investor 

06/01/2011 Liberata UK London Provides business process outsourcing services Endless 

10/01/2011 e2train Cirencester Provides learning and performance management systems WestBridge Capital 

10/01/2011 Name Your Number Manchester Provides the technology platform telecommunication operators Undisclosed Investor,Undisclosed Investor,YFM Group 

11/01/2011 Celtique Energie London Develops prospects for oil and natural gas in shore basins Avista Capital Holdings, LP,Undisclosed Investor 

11/01/2011 Niagara LaSalle (UK) Willenhall Manufactures steel bars Endless 

Provides cellular technology to operate a scavenger hunt. 

05/01/2011 Interswitch Nigeria Adlevo Capital Managers,Helios Investment Partners Operates an electronic transaction payment processing company. 


LP Voice 

Q1 Why does ff&P Asset Management invest in 

private equity? 

FF&P Asset Management invests in private equity on behalf of its clients 

because the asset class has shown it can deliver superior outperformance 

of public markets over the long term. The clients are mostly individuals 

and families with medium to long term investment horizons and a 

requirement for absolute returns and cash generation. 

Q2 What is your investment strategy? 

We are discerning private equity investors and believe extensive 

research and due diligence on opportunities and managers is crucial. 

Private equity can offer the largest spread of returns when compared 

to other asset classes. The difference between a top quartile private 

equity fund and a bottom quartile private equity fund can be expected 

to be larger than most, if not all, asset classes. It is also the case that 

when an investment is made into a private equity fund you expect to be 

invested for a long time, often more than ten years. It is vital, therefore, 

to establish a high degree of conviction in the investment case of all 

investments at the outset. We believe our approach to due diligence 

sets us apart from other managers. 

While it is often frustrating for new managers, we do have a preference 

to invest in managers with proven track records. 

Q3 How do you decide which funds to invest in? 

FF&P Asset Management has a global portfolio of private equity funds. 

The common thread is that they are all experienced fund managers with 

proven performance track records. We tend to work with experienced 

managers who have performed well for us and who demonstrate 

proven flair and investment acumen in their portfolio selections. A lot 

of work is undertaken to see if the dynamics in the management team, 

which contributed to its success, are still in place and the extent to which 

macro factors are likely to contribute to continued outperformance. 

In practice this often causes us to be loyal investors but the manager 

always earns and deserves our loyalty. 

This bottom up focus has to be matched with a top down approach 

to ensure that the portfolio is balanced in the direction agreed by our 

investment committee. 

It is worthwhile noting that while we have benefitted from a healthy 

exposure to emerging markets funds for many years, we do believe 

that the global financial crisis of 2008 has created a lot of very attractive 

investment opportunities in developed markets. 

Q4 How do you think the industry has changed over the 

last three years from the boom times to post-recession? 

Over the last three years we have seen both peaks of greed and deep 

valleys of fear. The widespread deleveraging that followed the financial 

crisis has served to shorten investment horizons and place a higher note 


with 

Simon Jamieson 

Director 

ff&P Asset Management Limited 

premium on less liquid investments. This has and will continue to lead 

to a shakeout and a degree of specialisation. Managers with poor and 

indifferent performance spanning multiple funds will struggle to raise 

new fund capital. 

The general partners and the limited partners have also had to adjust to 

longer holding periods – stretching now to seven or eight years in the 

venture space. A consequence of this is that limited partners can have 

less cash to commit to the sector. 

Q5 Over the last two years there has been much talk of 

LP discontent over the way they were treated by some 

of managers back in the boom days. Do you think this is 

justified and how has investor sentiment been affected by 

the recession? 

A Scottish rooted house like FF&P has struggled with some of the terms 

in the LP agreement, particularly relating to management and other fees. 

However, these tend to be clearly stated and have been agreed to by 

ourselves so there seems little ground for complaint. 

Investor sentiment will have been impacted by the recession. In 

previous cycles we have seen a rush to liquidity and a reduction in the 

availability of private equity, which has in turn caused a period of good 

returns for the asset class. This cycle may yet turn out to follow the 

same pattern. 

Q6 in recent months the private equity industry has been 

challenged over its performance, and investors questioned 

over why they continue to back the asset class in the way 

that they do. As ff&P Asset Management has invested in 

private equity for some considerable time, where do you 

stand in the debate? 

FF&P continues to believe that backing a good manager who invests in 

good businesses over the long term is a proven way to create wealth 

over the long term. 

There will be periods of underperformance, especially when public 

markets are so volatile. However, this long proven form of wealth 

creation perhaps lends itself best to private equity with its long term 

focus and structure. 

Q7 What to you think are the biggest challenges that the 

private equity industry faces in the coming months and 

years, and what, as an investor, would you most like to see 

change? 

A challenge for the industry going forward is the valuation volatility in 

many private equity portfolios, caused by the volatility in the public 

markets being reflected through the Fair Market Value Accounting 

principles. This lack of stability reduces the differential between public 

and private equity and has consequently chipped away at one of the 

historic characteristics of the asset class.

Case study The Right Fit 

Kurt Geiger 

Private equity helps to grow one of 

Britain’s best known footwear retailers 

Funded by 

Kurt Geiger is among the most recognised shoe brands in the world and a genuine UK 

success story. Opening its doors for the fi rst time in 1963, Kurt Geiger today sells more 

than two million pairs of shoes a year, or 10 pairs every minute. 

In 2008, UK private equity house Graphite Capital led a £95m management buyout (MBO) 

of the business, which has since opened 20 stand-alone stores across the country and 

created more than 600 new jobs. And, despite the recession, recorded a 17% increase in 

turnover and a 21% increase in earnings in 2009. 

Strategy 

With the help of Graphite’s expertise in the retail sector, the MBO offered Kurt Geiger the 

opportunity to grow both nationally and internationally across all its distribution channels. 

In the UK the business had identifi ed a roadmap for rolling out its highly successful ownstore 

model to additional high street and airport locations. There was also strong scope to 

strengthen the company’s existing partnerships with premium department store groups 

where Kurt Geiger operates all aspects of the multi-branded shoe departments. 

The company’s international footprint was still relatively limited at the time of the MBO, 

meaning there was an opportunity to target new territories. Other business areas, such as 

licensing and online sales, were underdeveloped and offered potential for growth. 

Achievements 

Since the MBO, the group has opened over 20 stand-alone Kurt Geiger stores in the UK, 

including a new fl agship concept store in Covent Garden. 

Under Graphite’s ownership, the company has won a number of new contracts, including 

further selling space within the Selfridges and Fenwick’s store groups as well as a new 

contract with Debenhams. It has also signed an exclusive UK distribution agreement with 

Nine West, a US-based footwear brand. 

Internationally, it has expanded its franchise agreement in the Middle East, with stores 

opening in Dubai, Kuwait, Qatar and Bahrain. More recently, it has signed agreements with 

franchise partners in Russia, Turkey and Malaysia. 

Performance 

Despite the challenging economic backdrop for retailers, Kurt Geiger has performed 

strongly, thanks to its focus on luxury and premium product, geographic spread and multichannel, 

multi-brand business model. 

EBITDA (earnings before interest, taxes, depreciation, and amortization) has risen by more 

than 20% in each of the past two fi nancial years to a record £14.7m in the year to January 

2010. Like-for-like sales have risen strongly, with designer shoe sales within department 

store partners Harrods, Selfridges and Liberty at a record high. Internet sales trebled and 

now account for 15% of own brand sales. 

Job creation 

Kurt Geiger has created more than 600 new jobs since its acquisition by Graphite in 

January 2008, refl ecting the rapid expansion of its sales channels and international 

penetration. With original design as a core principle, the group has more than doubled the 

size of its design team since the MBO. 

Investor: Graphite Capital 

Location: London 

Sector: Retail 

Stage: MBO-2008 

Exit: Currently in portfolio 

Company Website: www.kurtgeiger.com 

Investor Website: www.graphitecapital.com 

“We were impressed by 

Graphite’s strong track record 

of successful investments in 

retail and consumer businesses. 

We offer some of the world’s 

best shoes in an unrivalled 

retail environment and are well 

recognised for the quality of 

our range and the high standard 

of our customer service. With 

Graphite’s retail expertise and 

support we are pursuing our 

strategic objective of becoming 

the leading global luxury and 

premium shoe retailer.” 

Neil Clifford, chief executive, Kurt Geiger 


For further information 

contact the BVCA 

1st Floor North, Brettenham House 

Lancaster Place, London WC2E 7EN 

T: +44 (0)20 7420 1800 

F: +44 (0)20 7420 1801 

E: bvca@bvca.co.uk 

bvca.co.uk

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