Apax Partners is merging its U.S. and European operations as part of an ongoing effort to streamline the growing private equity firm. The move, announced in August, is designed to boost U.S. buyout activity in the short term, while paving the way for a global mega-fund offering sometime in the future.
From a structural standpoint, little will change at Apax as a result of the merger. A common management company will now oversee all Apax investments, but the current generation of geography-based funds essentially will continue to operate as independent entities. Apax has about $6.25 billion in capital under management, including funds in France, Israel and Japan. Most of that money is unspent, but it is likely that the $1.1 billion U.S.-based Apax Excelsior VI fund (raised in 2000) will run out of cash far sooner than the $3.73 billion Apax Europe V fund raised in 2001. If this happens, the plan is to raise enough for a U.S. fund so that the end of its investment cycle coincides with that of the European fund. At that point, if the market is receptive, Apax will launch a global mega-fund.
In the immediate future, Apax hopes to expand its presence in the U.S. buyout market. It participated in the $150 million carve-out of Seattle-based Zymogenetics Inc. in 2000. It is better known for European buyout deals like last year’s $3.5 billion LBO of U.K. yellow pages publisher Yell.
“Our U.S. buyout business right now has around 40 people, but we’d like to expand that number to 50 over the next year,” says Ronald Cohen, chairman of Apax Partners. “We’re also looking to hire senior people in the technology and health care areas, since one-third of our business is early-stage investing.”
Cohen adds that the merger will help Apax continue to emphasize sector specialization along its five investment lines of IT, media, financial services, health care and consumer/retail.