About a month after London-based Apax Partners LLP began raising a €9 billion ($12.7 billion) leveraged buyout fund, local rival Permira Advisers LLP told investors it wanted €6.5 billion for a new pool, people briefed on the talks said.
Permira, which still has more than a year to finish investing its existing €9.6 billion fund, is joining a rush by private equity firms including New York's KKR & Co. and Warburg Pincus LLC to raise cash now, just as investors warn they haven't got the money to continue backing all firms.
“Many firms have realized they can't count on their clients' loyalty only to raise funds,” said Jeremie Le Febvre, a partner at Triago SA, which helps firms raise money. “They can't afford to wait if they want a piece of the pie. It's reality-check time for everyone, and some will be disappointed.”
Investors in private equity funds say they're planning to reduce pledges to the largest of the new pools and invest in fewer of them, partly because they haven't received enough money back from previous funds to match commitments during the boom years. Limited partners are also shifting away from large buyout funds to firms targeting smaller deals and investments in faster-growing emerging markets, making the pie available for LBO firms in Europe and the U.S. even smaller.
“Firms at the larger end are taking one another on in fundraising, vying for scarce and selective capital,” said Mounir Guen, head of MVision Private Equity Advisers, which helps firms raise funds. “They'll end up partially cannibalizing one another, hence take much longer to raise their funds and make it more challenging to reach their targets.”