Feb. 21 (Bloomberg) -- BC Partners Ltd., the British private-equity owner of gym operator Fitness First Ltd., raised 6.5 billion euros ($8.6 billion) for leveraged buyouts in Europe, surpassing its target thanks to demand from sovereign wealth funds in the Middle East and Asia.
BC European Capital IX, which will target controlling stakes in “defensive growth” companies, was oversubscribed and is 14 percent bigger than the previous one, the London-based firm said today in a statement. Sovereign wealth funds provided 25 percent of the commitments, up from under 10 percent in the last fund.
“I am delighted with the enthusiastic response from existing and new investors from around the world, particularly in the context of a challenging fundraising environment,” Charlie Bott, head of investor relations and a managing partner, said in the statement.
BC Partners was one of the first private-equity firms in Europe to return to investors in 2010 for a new fund after the financial crisis stymied dealmaking. Initially targeting 6 billion euros, it offered a 5 percent discount on fees for investors who committed money before its first close in early 2011, people with knowledge of the matter said then. It also agreed to end transaction fees, billed each time the firm or one of its companies make an acquisition, to lure investors at a time when lack of distributions made them reluctant to commit to new pools.
The firm said it secured “a substantial amount” of commitments from the majority of existing investors, though didn’t disclose the actual percentage. Existing investors who chose to “re-up” did so with pledges 25 percent smaller than last time, Bott said in a telephone interview.
The deepening of the European debt crisis since July has made fundraising more difficult, he said.
Since July, “we spent quite a bit of time talking about Europe, more so than previously,” Bott said. A couple of times, it happened that a backer’s “investment team had recommended us, but the investment committee had a blanket no on Europe,” he said.
Demand from other investors in Asia and the Middle East helped offset concern from North American investors on Europe, he said.
“It came down to the consistent track record, the hard work,” Bott said. “We spent north of five or six times more people hours doing this fundraising than last time. We also have been consistent returning capital since the beginning of 2010, and investors gave us good marks for that.” Being one of the first firms in Europe to come back for funds was, in retrospect, “lucky” timing, he added.
Fundraising by Region
About 40 percent was raised from backers in North America, 30 percent in Europe and 30 percent in Asia and the Middle East, the firm said. About 37 percent of backers are pension funds and fund of funds 12 percent.
Some of the largest European firms, including Apax Partners LLP, Cinven Ltd. and Permira Advisers LLP, are following suit raising buyout funds. Private-equity firms, which are seeking $711 billion globally, raised 46 percent less in the third quarter than in the previous quarter amid the European debt crisis, according to London-based research firm Preqin Ltd. Meanwhile, the value of LBOs announced in the second half of last year dropped 32 percent to $71.5 billion from a year earlier, according to data compiled by Bloomberg.
The BC Partners fund will focus on European investments and can invest as much as 25 percent outside of Europe, which would primarily be in the U.S., Stefan Zuschke, a managing partner, said separately on a call with journalists today in Germany.
“We now have sufficient ammunition to invest and that gives us an advantage to some of our competitors,” Zuschke said. “It was worth it to be the first out of the gate.”
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