Electra Private Equity Calls it Quits

There is one place on earth where private equity isn’t roaring — in fact, it’s flailing.

Illustration by II

Illustration by II

Amid a slowdown in private-equity fundraising in Europe, United Kingdom-based Electra Private Equity has announced plans to wind down and return capital.

The private-equity fund has been listed on the London Stock Exchange since 1976. But late last week, Electra announced on October 4 that it will sell a few of its larger assets, and is seeking buyers for others, including restaurant chain TGI Fridays.

The move results from a long strategic review process, according to the firm, and a years-long activist campaign by Edward Bramson of Sherborne Investors.

Electra is a rare private-equity firm to shutter in recent years. Its wind down appears to be not only the result of tough Brexit-related fundraising conditions in the U.K., but also its own struggles in the market.

“Having carefully considered all options the board now believes that given the size of the portfolio and the structural inefficiency of the listed private equity model that is accentuated by making new investments, it is now in shareholders’ best interests to announce the controlled realization of the remaining portfolio over an appropriate period,” said Neil Johnson, Electra’s chairman, in a statement.

European private-equity funds are struggling to gather investor capital, while their North American counterparts break records.

European buyout fundraising fell 68 percent during the third quarter versus 2017, according to data provided by LP Source. Firms raised $7.9 billion across 33 funds in the third quarter of 2018, as compared to $24.6 billion raised by 46 funds during the same period in 2017.

“While many investors – by no means all – are taking a break from committing to UK private-equity funds, it should last only as long as there is a lack of clarity on how Brexit will occur,” a spokesperson for Triago, a European private equity advisory firm, wrote via email. “Given apparent progress on this front and the looming deadline for the break, UK fundraising could easily take a significant turn for the positive within two or three quarters.”

In Electra’s case, capital has long been an issue. The firm began a strategic review process back in 2016 after activist Bramson built up a major stake and launched his campaign, according to the website. That year, Electra opted to cut ties with its outsourced investment manager and replaced the entire executive team with board members.

The company began considering a wind down in October 2017, when the firm issued a statement saying that “current market conditions do not support new investment.” Electra promised to reevaluate as necessary.

However, one year into that evaluation, Electra’s management has apparently made up its mind. The firm is in the process of selling off two major assets — Photobox and Knight Square — to funds advised by Lexington Partners L.P. Those funds are set to pay £98 million ($128 million) in cash for Photobox, and £21 million for King Square, according to an investor presentation.

Electra still needs to sell off TGI Fridays, as well as Hotter Shoes, the announcement said. A spokesperson did not return a phone call seeking further comment.

Electra joins a few notable private-equity firm shutdowns — and near-shutdowns — in recent years.

Better Capital, a UK-listed turnaround firm headed by Jon Moulton, announced in 2016 that it would cease raising funds and begin a portfolio-monitoring and exit-planning process.

Also in 2016, another UK-listed private-equity firm SVG Capital nearly wound itself down but was acquired by Harbourvest Partners later that year.

These processes tend to take a long time, given that most private-equity firms remain invested in their portfolio companies until they can extract sufficient value.