F&C Ventures seals independence and becomes Graphite Capital

23 April 2001

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Graphite Capital has been formally launched following the completion of a management buyout of F&C Ventures. The deal, which had been announced at the beginning of the year, comes around five months after HypoVereinsbankâ€™s 90% stake in Foreign & Colonial Asset Management was sold to Eureko and represents the latest in a long line of captive and semi-captive UK private equity teams to go it alone.

The 12-strong Graphite Capital team, headed by managing partner Rod Richards, has been a stalwart of the UK mid-cap sector for around 20 years, managing external limited partnerships (five in total, the latest of which raised Â£195m in 1999) and the quoted Foreign & Colonial Enterprise Trust (FACET). According to Rod Richards, a primary aim of the team throughout the negotiation process has been to ensure real continuity of the groupâ€™s investment philosophy and funding structure. As a result, the only practical change to take place following the MBO, aside from ownership, is that FACET will, subject to shareholder approval, be renamed Graphite Enterprise Trust.

The quoted vehicle, which has been the top performing UK investment trust over the 10 years to 2000, will continue to be included in all the Foreign & Colonial brand saving schemes. In total, the Graphite team has achieved an overall return on its portfolio, including unrealised assets, of more than 36% per annum since 1990; the figure for realised investments stands at 43%.

Also unchanged is Graphiteâ€™s primary investment focus. While other groups have been tempted over the last few years to hit at a heavier weight, Graphite remains firmly committed to the mid-market, mainly in the UK but also occasionally on the Continent. The group will continue to focus firmly on providing private equity backing, mainly via buyout-type transactions and growth capital situations, to companies valued at Â£5-50m. Although it does invest in transactions as part of a syndicate, the team has historically led the large majority of its investments, often as a sole backer.

Commenting on the investment philosophy, Rod Richards explains: â€˜We have built up a strong track record by investing in mid-market companies and this focus will not change, as we believe these companies offer the best prospects for high returns. We will consider any sector, including some not favoured by other private equity investors, such as financial services and retailâ€™.

In 2000 the Graphite team provided approximately Â£100m in 12 transactions. The most recent deals include the buyouts of Socius Group, C-Side, KM Office Furniture, TileCo and Zip Ignition Products.