European Alternative Asset Managers Seek Private Equity Funds

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European alternative asset managers are increasingly looking to sell a stake in their companies to private equity firms as company founders step back and the growing size of funds pushes managers to seek cash.

Jeff Brown, managing director of Azimut Alternative Capital Partners (AACP), already sees more opportunities emerging from Europe.

“It will be a very active place, especially in the middle and emerging market manager landscape. I can’t say if it’s a function of European companies recognizing the potential sale of a stake or as we become better known, but bankers are calling us from France, the UK and Spain,” did he declare.

“They all have clients and are working on finding really strategic capital and solving the GP [general partners] commitment financing problem.

Funds that take stakes in other companies in the private markets have become popular in recent years as investors seek to benefit from the growth and growing popularity of the industry.

The dedicated divisions of Petershill Partners and Blackstone are among the most important to target this sector. Blackstone closed its second vehicle in November, raising $5.6 billion (4.9 billion euros). In total, these funds have raised €25.8 billion in capital since 2015, according to PitchBook.

Companies that have already sold a stake in themselves include BC Partners, Francisco Partners and HIG Capital. Data from PitchBook shows there have been 21 deals worth €1.6 billion this year alone.

To date, the majority of transactions have focused on large private asset companies. However, as more founders of midsize companies prepare for a change in management and seek liquidity, Brown expects to see more market opportunities in this segment.

“We’ve seen some iconic transactions in the demographic march of the industry. Next year is going to be very busy, regardless of what happens with interest rates and inflation.

In a recent note, Oxford Financial Group chief executive Robert Webb said it’s no surprise that investors are looking to take stakes in private equity firms.

“GP equity investors typically seek an 8%-15% annual cash return and an overall gross multiple of 2.5-3x of invested capital. This return should be realized about equally from management fees, interest carried, and realizations on co-investments,” he wrote.

With the potential increase in GP stake deals in Europe, Brown wonders how the legal community will handle the workload.

“I wouldn’t be surprised if global companies such as Kirkland and Sidley Austin end up doing these transactions.”

One of the most important areas Brown envisions is the emerging manager space.

“Creating business value is such an important factor. We make anchor capital commitments in emerging manager funds as well as generally low working capital.

“We are generating return on anchor engagement and rising GP attendance.”

AACP is majority owned by Italian asset manager Azimut Group. The group has previously taken stakes in opportunistic lending firm Kennedy Lewis and private equity group HighPost Capital, founded by Mark Bezos, brother of Amazon founder Jeff Bezos.



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