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Palamon pushes fundraising via old fund stake sell-off

José Rojo
26 August 2015

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Palamon Capital Partners has struck an agreement to have five LPs acquire stakes in its 1999 and 2006 buyout funds and simultaneously invest in 2013-vintage Palamon Auxiliary Partnership (PAP) fund.

Acquiring the stakes from the earlier LPs were private equity house Adams Street Partners, Goldman Sachs' and Morgan Stanley's private equity arms, the Netherlands' second-largest pension fund PGGM, and Rothschild Merchant Banking Group.

Speaking to unquote", Palamon co-founder and managing partner Louis Elson explained the five LPs picked up approximately 25% of both Palamon European Equity I and II, which date back to 1999 and 2006, respectively.

According to Elson, the consortium of buyers acquired the stakes in either vehicle at upwards of 95% their actual value.

Simultaneously, the buyers committed capital to a new vehicle investing alongside the Palamon Auxiliary Partnership, 2013. Although Palamon has yet to comment on the contribution size, press reports place it around the €100m mark.

Launched in late 2011, PAP closed on €210m; fundraising struggles by the GP led it to downsize the vehicle and shrink its investment period to 2-3 years. The current transaction will see PAP being upgraded to a standard 10-year lifespan, 5-year investment period fund, according to Elson.

The GP, which declined to comment on current fundraising efforts, has so far drawn equity from the fund for three deals: the acquisition of The Simplify Group by portfolio company QualitySolicitors, the buyout for Italian luxury leather goods producer Il Bisonte in June 2015 and, most recently, the MBO for UK foreign exchange service Currencies Direct alongside Corsair Capital for more than £200m.

The move by Palamon follows that of UK buyout house Doughty Hanson in January, when a proposition was made to LPs for the sale of stakes in its 2004 and 2007 funds.

The offer, representing a combined €750m in assets, was followed by Doughty's announcement in April that fundraising would come to a standstill as the GP focused on its portfolio.