Terra Firma claims to have €1bn in capital

The firm says third party capital is part of the mix and that it may seek to raise a new fund in the future.

Terra Firma Capital Partners, a European private equity firm, has said it has committed capital of €1 billion of capital into future deals.

It is unclear whether the fresh funds consist of third-party money. The Guy Hands-led firm will invest the capital on a deal-by-deal basis. Some of it could potentially also be committed to a future fund, according to a source familiar with the matter.

“With transactions like Deutsche Annington, we have returned more than €6 billion to our investors over the last three years and produced cash profits for them in excess of €4 billion. Based on the capital returned and the profits made we are delighted to announce that we have committed discretionary capital available for new transactions,” Guy Hands, chief investment officer and chairman of Terra Firma, said in a statement.

The firm declined to comment on the exact investment strategy, but Hands said that the firm “will still focus on asset-backed businesses that require change, as we always have, but by being creative and imaginative we hope to find a wider range of potential opportunities. With this capital, Terra Firma will be able to invest across a broader spectrum of opportunities, and allow us to be more entrepreneurial and opportunistic about the way in which we invest.”

The change in investment approach comes as Stefan Thiele, a managing director in the renewable energy infrastructure team, left the firm, the source added. Thiele was hired after Damian Darragh, a long-serving partner who had fronted the firm’s renewable energy investment team, was asked to leave the business last year, because of a disagreement over Darragh’s focus on fundraising. The firm is currently still attempting to collect €2 billion for renewable energy investments.

Terra Firma has not raised fresh capital since its last buyout fund in 2007. In July 2014, the €5.4 billion Terra Firma Capital Partners III (TFCP III) raised in 2007 was valued at 0.8x capital, a multiple that improves to 1.2x with EMI excluded. TFCP II, which closed on €2.1 billion in 2002, was at 1.9x with EMI and 2.6x without. Terra Firma’s investments have generated a gross IRR of 38 percent on 1.6x money with the music business, and 41 percent/1.9x without, the firm told Private Equity International (PEI), a sister publication of Infrastructure Investor, last July.

Last year, the firm also planned to raise a separate €2 billion vehicle for medium-sized transactions, but has so far failed to collect any capital. Terra Firms continues to suffer from its investment in British music publisher EMI (in which Terra Firma lost £1.6 billion of equity), Hands admitted to PEI last July. “EMI is an issue,” Hands said.

But the firm has also never spent time on building up a proper fundraising capability, he added. “Terra Firma has institutionalised financially and operationally, but not with the investor relations function. We don’t have enough people who can go out and raise money in their own right – people who have the skill set to interact with investors, who want to do it and who are good at it,” Hands said.