So much for venture capital

Further evidence of the dominance of buyout activity within the private equity industry - Apax Partners is reportedly giving up on the venture end of the market. It does seem the company will continue to have some involvement in expansion stage, as the FT talks about growth capital, but it does underline where the industry is headed.

Apax Partners has abandoned the venture capital end of the private equity market on which it was founded as it attempts to raise a record amount for a European buy-out fund of as much as €11.17bn ($15bn).

The move underlines the parlous state of the European venture capital market, one of the worst-performing parts of the global private equity market that encompasses buy-outs, mid-market deals and growth capital.

Sir Ronald Cohen, the Apax founder who quit in 2003, has been a staunch supporter of European venture capital. With the industry facing unprecedented political scrutiny after a series of controversial deals, Apax’s move could spark concern over the fate of venture capital, often portrayed as the acceptable face of private equity.

Sir Ronald, a leading Labour party donor, is likely to be dismayed by Apax’s decision. However, the firm, now run by chief executive Martin Halusa, has its sights set on becoming one of Europe’s three biggest firms in the global buy-out market.

Apax will this week contact investors to request formally lifting the maximum it can raise for its latest buy-out fund from €10bn to €11bn. With additional contributions from Apax partners of as much as €165m, that would lift the total to €11.17bn – just €70m more than arch rival Permira’s €11.1bn record fund.

Apax declined to comment and the fund is not guaranteed to raise its top estimate.

Replacing Permira as Europe’s biggest buy-out group may step up the level of public notoriety directed at Apax. Permira has suffered unwelcome publicity on deals such as its buy-out of the AA, the motoring organisation.

However, the record European fund-raising underlines investor appetite for private equity at a time when the industry is completing record numbers of deals.

Elsewhere the FT also highlights an OECD report which argues that monetary policy in Japan and China is a major factor behind the buyout boom.