Is History Repeating Itself at BC Partners? PE Firm Falls Short in Fundraising, Draws Scrutiny over PetSmart Investment
November 18, 2021
UK-based private equity firm BC Partners struggled to raise its last buyout fund, BC European Capital X, in 2017. Now, BC Partners is behind in fundraising for its newest buyout fund, BC Partners XI and has asked investors for more time to secure other commitments, according to Bloomberg News.
BC Partners had sought to raise about $9.8 billion by August but has brought in less than $6 billion so far. Bloomberg reported that the firm has pushed the fund’s closing date to January 2022 but is still likely to come up short.[i]
This comes at a time when private equity firms are on pace for a record fundraising year, having raised about $630 billion in 2021.[ii]
BC Partners began talking with investors in late 2019 about its 11th fund[iii] and registered the fund in October 2019.[iv] Two years later, the firm is far short of its target. The average time that private equity funds spent in the market raising money was about 15 months in 2020, data provider Preqin reported.[v]
Bloomberg reported that two large investors in BC Partners’ past funds, the Ontario Teachers’ Pension Plan Board and the Washington State Investment Board, have decided not to participate in BC Partners XI.[vi]
Other large investors in past BC Partners that appear to have thus far held off on investing in the new fund include the State of Connecticut Treasury, the Korea Investment Corporation, the Teachers Retirement System of Louisiana, the Kuwait Investment Authority, and the Michigan Department of Treasury.[vii] The Caisse de Depot et Placement du Quebec is still considering whether to invest in BC Partners XI, Bloomberg reported.[viii]
BC Partners reported that pension funds accounted for 45% of the commitments to its last fund, and sovereign wealth funds accounted for 20%.[ix]
This is exactly what some analysts warned about. In 2017, BC Partners struggled to hit its fundraising target for its last fund, BC European Capital X, as some of its high-profile holdings ran into trouble.[x]
“[BC Partners] can ill afford another experience like the last round,” a May 2019 Bloomberg story said. “It took BC about 18 months before it finally hit its 7 billion-euro ($7.9 billion) target in 2018, losing ground to some competitors. Six months earlier, CVC Capital Partners had raised more than twice that amount in a third of the time.”[xi]
“The mood music around BC is that the jury is still out,” Charlie Bott, BC Partners’ former head of investor relations said in 2019 before the launch of BC Partners XI.[xii]
Bott, who retired in 2018, was one of a string of departures among BC Partners’ investor relations staff in recent years. Laura Cogis also left in 2018,[xiii] and Richard Kunzer left in April 2021.[xiv]
Problems at PetSmart
BC Partners’ fundraising troubles come at a time when the firm is facing increased scrutiny regarding its ownership of the PetSmart chain of pet stores.
US Senator Elizabeth Warren sent a letter to BC Partners expressing concern that since the firm’s 2015 acquisition of PetSmart, conditions for workers have deteriorated and that PetSmart’s inadequate training and staffing led to hospitalizations and deaths of pets and excessive COVID exposure for workers. Warren’s letter followed the release of a report from United for Respect, “Greed Unleashed”, documenting these problems. Warren raised the question of whether these problems. Warren raised the question of whether BC Partners had engaged in severe cost cutting measures in order to boost profits for themselves at the expense of workers and consumers.
Bloomberg, Nov 3, 2021: “Warren Questions BC Partners Over PetSmart Working Conditions”
Bloomberg, Nov 4, 2021: “Elizabeth Warren Questions PetSmart Owner on Worker, Pet Safety”
PetSmart worker Isabella Burrows recently spoke at a Cornell University labor forum, detailing some of the same concerns.
[i] https://www.bloomberg.com/news/articles/2021-10-13/bc-partners-set-to-miss-fund-target-even-after-seeking-extension
[ii] https://www.bloomberg.com/news/articles/2021-10-13/bc-partners-set-to-miss-fund-target-even-after-seeking-extension
[iii] https://pitchbook.com/newsletter/bc-partners-weighs-going-big-with-next-fund
[iv] BC Partners XI GD – LP Companies House Filing , October 24, 2019
[v] https://caia.org/sites/default/files/2021-04/CAIA%20%26%20Preqin%20-%20Private%20Equity%20Market%20Update%204-15-21.pdf
[vi] https://www.bloomberg.com/news/articles/2021-10-13/bc-partners-set-to-miss-fund-target-even-after-seeking-extension
[vii]https://find-and-update.company-information.service.gov.uk/, accessed Nov 5, 2021.
[viii] https://www.bloomberg.com/news/articles/2021-10-13/bc-partners-set-to-miss-fund-target-even-after-seeking-extension
[ix] “BC Partners closes tenth flagship private equity fund at €7bn,” Media release, Jan 17, 2018.
[x] https://www.bloomberg.com/news/articles/2019-05-01/-amazing-svider-man-fights-to-prove-bc-partners-revamp-pays-off
[xi] https://www.bloomberg.com/news/articles/2019-05-01/-amazing-svider-man-fights-to-prove-bc-partners-revamp-pays-off
[xii] https://www.bloomberg.com/news/articles/2019-05-01/-amazing-svider-man-fights-to-prove-bc-partners-revamp-pays-off
[xiii]https://www.penews.com/articles/bc-partners-head-of-investor-relations-management-steps-down-20180417
[xiv]https://www.linkedin.com/in/richard-kunzer-6408a032/, https://www.privateequityinternational.com/bc-partners-loses-ir-rainmaker-appoints-top-citi-banker-as-global-head/
