LONDON – Phildrew Ventures expected a first closing on its fifth and largest fund in late 1998. With a target of GBP300 million ($495 million), the Phildrew Ventures Fifth Fund is nearly double the size of its predecessor, which raised GBP164 million ($271 million) in 1995. Phildrew, however, will need to raise only GBP150 million ($247 million) from third parties to hit its target, thanks to a GBP150 million commitment from UBS Capital Partners.
UBS Capital Partners took a majority shareholding in Phildrew Ventures last spring, integrating the United Kingdom manager into its European private equity division. Its very substantial commitment to the latest Phildrew offering compares with a contribution of less than 10% of the fourth fund’s total and underlines the strategic advantages of integrating Phildrew into the UBS Capital Partners network. The fund commitment represents the first time UBS Capital Partners has been in a position to secure significant exposure to U.K. private equity. Previously the group, which invests off its parent’s balance sheet, was precluded from investing in Europe’s dominant private equity market because it would have been in direct competition with third-party funds managed by Phildrew, which is a subsidiary of UBS’s fund management arm.
The increased size of the fifth fund gives Phildrew a capacity to undertake larger transactions. Partner Ian Hawkins said that while Phildrew would preserve its focus on U.K.mid-market buyouts and buy-ins – which does not preclude investment in a limited number of attractive early-stage or development capital opportunities – it would cut out some smaller deals and open the door to larger ones, but the key message is “more of the same.” Whereas in the past Phildrew has targeted deals in the GBP10 million to GBP100 million range, ($16.5 million to $165 million) it will now concentrate on transactions valued at between GBP20 million and GBP200 million ($33 million and $330 million).
The new fund’s remit covers the U.K. and Ireland, and Phildrew will not lead transactions in other European markets, which are covered by the rest of UBS Capital Partners’ network. It will, however, benefit from an increased flow of multi-jurisdictional transactions channeled through the UBS network and from co-investment with UBS Capital on larger transactions.
Fund raising is proceeding well, said Mr. Hawkins, who added that Phildrew has concentrated on marketing to major investors in the group’s earlier funds. Given that the fourth fund was scaled back after attracting commitments of more than GBP200 million, prospects for reaching the fifth fund’s target without recourse to a wider marketing exercise look good. It is, however, possible that one or two first-time participants might join the fifth fund, capacity permitting. “While we didn’t set out to target new investors, some new investors have been talking to us,” Mr. Hawkins admitted, but he emphasized that previous investors would be given first priority.
The group hopes to hold a final close on Phildrew Ventures Fifth Fund, which will have an eight-year life, during the first quarter of this year, a schedule that will accommodate participants wishing to commit from their 1999 private equity allocations.
The fourth fund, which began deployment in early 1996, currently is some 90% invested and has already seen three realizations from its portfolio: Mayfair Taverns; Trident Automotive; and Greetings Store Group.
To handle strong deal flow and increased funds under management, Phildrew Ventures recently appointed three new investment executives, increasing the size of its management team to 11. Manekesh Dattani joined from the Hong Kong office of Morgan Grenfell Development Capital, Simon Jennings moved from UBS in Zurich and Adrian Yurkwich previously worked at the Leeds office of 3i.