Spinouts: Private equity goes private

After more than a year of rumours, the long-awaited MBO of Barclays Private Equity from listed Barclays bank appears to be progressing, and might even be concluded this summer. According to the investor, the portfolio has performed well during the crisis and will be continued to be managed by Barclays Private Equity after the spin-out. Barclays Private Equity is also reportedly planning to gather more dry powder. The firm plans to raise a fund of around €1.5bn to €2bn later in the year.

This follows the spinout of SG Capital Europe, the private equity arm of Société Générale's asset management subsidiary, SGAM, which became independent from its parent and re-branded itself Syntegra Capital in December 2009. But activity is not limited to captive funds of banks. In January 2009, Close Ventures bought itself out from the Close Brothers Group umbrella and re-named itself Albion Ventures. It was formed by the executive directors of Close Ventures.

One month later, in February 2009, Finnish venture and growth investor Eqvitec sold its mezzanine operations to the newly formed Armada Mezzanine, led by former head of mezzanine at Eqvitec, Pertti Nurmio. Armada took over all of Eqvitec's mezzanine funds, including the latest fund, which closed on €103m in April last year.

The increased number of private equity spinouts may be an indicator of the difficult environment many large financial institutions are operating in. Where the parent is a bank, spinning out the private equity business reflects the need to comply with regulation as well as an attempt to clean up bloated balance sheets and focus on the core strategy. In a situation where many banks are propped up by governments and struggling to return to financial health, this re-focus provides opportunities for managers to do what private equity does best - take an entrepreneurial approach to deploying private capital.

Barclays Private Equity is expected to become independent within a matter of months, and as long as large financial institutions remain in difficulty, it seems likely more in-house managers will look to set out on their own.

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• Barclays Private Equity