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Buyout groups in fundraising boom

It may only be April, but it is already becoming clear that total funds raised by buyout firms around the world this year will shatter the total garnered in 2004.

In 2004 70 buyout funds around the world raised a total $57 billion (€44 billion) according to figures produced by information provider Private Equity Intelligence. A quick glance at funds recently closed or about to close suggests this figure will soon be surpassed this year by just a small number of managers.
 
In Europe, CVC Capital Partners is reported to be approaching a final closing on a €6 billion fund, while BC Partners is said to have posted a €5 billion first closing on its way to a €5.5 billion final target.
 
Meanwhile, Bridgepoint is understood to be near a €2 billion first close, while PAI Partners of France is poised for a €2.7 billion final total. Apax Partners had reached around €3 billion by December 2004 on its way to a €4 billion final target. European funds launched by US-based houses KKR and Advent International are targeting €3 billion and €2.5 billion respectively.      
 
Meanwhile, earlier in the year Carlyle Group closed its latest European effort on €1.7 billion, Barclays Private Equity on €1.65 billion, and Doughty Hanson on €1.6 billion.   
 
Across the Atlantic, The Carlyle Group recently closed its latest US fund on $7.85 billion. Carlyle’s effort constitutes the largest private equity fund ever organised, but the Washington-headquartered firm is unlikely to hold on to this record for very long:  For instance, Goldman Sachs Capital Partners and Warburg Pincus are reported to be targeting amounts of $8.5 billion and $8 billion respectively.
 
Many of the popular funds to have closed recently were in fact oversubscribed and could have easily raised  more capital than they were prepared to take on. This also applies to those groups that are currently in the market, highlighting just how keen investors are to secure space in funds run by those managers that are most highly thought of.  
 
Totting up the figures that have been raised or are being targeted by the firms referenced above gives a total of $67 billion. And that is before taking into account the pipeline of LBO funds expected to launch into the market later this year: among them Blackstone Group ($10 billion); Thomas H Lee Partners ($7.5 billion); plus new multi-billion euro funds from Candover and Cinven
 
The Private Equity Intelligence report predicted that private equity firms – encompassing all strategies and stages of investing – would be seeking $250 billion in 2005, having raised a total $136 billion last year. The current level of fundraising indicates that this prediction could be met.

Concomitant with larger funds, it would seem, come heftier transactions: a phenomenon described by the UK’s Sunday Times recently as “The March of the Mega-deals”.
 
In the US, news that a Silver Lake Partners-led consortium last month agreed the $11.3 billion purchase of financial software company SunGard was followed by reports that Carlyle Group and Cerberus Capital have their sights set on an $18 billion bid for department store retailer JC Penney, while Kohlberg Kravis Roberts and Providence Equity Partners are pondering a $15 billion approach for cable operator Adelphia Communications Corp.
 
In Europe, Spanish travel business Amadeus Global Travel Distribution earlier this year agreed a €4.3 billion takeover by BC Partners and Cinven, while Italian wireless carrier Wind Telecomunicazioni is currently the subject of a record-shattering €12 billion offer from a consortium led by Blackstone Group.
 
Mega-funds investing in mega-deals is a heady concept. One leading London-based placement agent does not think the good times will roll forever. He says: “There is good deal flow around at the moment, but whilst I can see deep liquidity and the refinancing boom lasting another 12 months, I can’t see it lasting another three years.”