CVCA-Birch Hill Equity Partners eyes exits, new acquisitions

Fri May 27, 2011 12:06am EDT

* Will sell to private equity buyers for first time

* Raised C$1 bln fund in January

* Has made two acquisitions under new fund, more pending

By Pav Jordan

VANCOUVER, May 26 (Reuters) - Birch Hill Equity Partners, a mid-market Canadian private equity player, expects to have distributed some C$700 million to its partner investors in the first six months of the year after selling assets to strategic buyers, a senior company executive said.

Stephen Dent, a partner with the fund, told Reuters on Thursday the firm also has a number of other sale processes underway, and that at least three could close before the end of the year.

"Of those, two I would say will go to private equity buyers and one will go to a strategic buyer, and of the other transactions we've had this year, three would have gone to strategic buyers," Dent said on the sidelines of the Canadian Venture Capital and Private Equity Association annual conference in Vancouver.

Sales of assets between private equity funds are gaining momentum as the firms seek to deploy capital raised before the global financial crisis, and as leverage returns to the market and debt markets recover.

Those factors have made valuations on private equity assets rise, and players say the market favors sellers over buyers.

Birch Hill has some C$2 billion in capital under management. It has 20 partner companies and has seen 27 fully realized investments since 1994.

Dent said the sale processes this year to other private equity buyers would be a first for Birch Hill, which historically has exited about half its investments through initial public offerings and the other half through sales to strategic, or corporate, buyers.

Late last year Birch Hill sold Kitchener, Ontario-based Atria Networks, the owner of 5,600 km of fiber optic cable, to Rogers Communications (RCIb.TO), Canada's biggest wireless company.

Dent said that Birch Hill made some C$355 million on the deal after debt, on C$85 million of investment.

DEPLOYING CAPITAL

Birch Hill, with its Birch Hill Equity Partners IV fund of slightly over C$1 billion in January, is also an active buyer, although Dent said finding good deals in the current market was challenging.

"We've made two investments at this point in time," said Dent, a Canadian who got his start in private equity as a summer student at Toronto-Dominion Bank , Canada's second-largest lender.

"And we'll probably announce some new transactions shortly as we are actively looking to invest that fund right now."

Dent could not provide many details about the investments, saying only that they would be valued at between C$25 million and C$100 million, roughly in Birch Hill's sweet-spot range. (Editing by Muralikumar Anantharaman)