US private equity firm to acquire Avoca Capital

US private equity giant KKR has agreed a deal to acquire Dublin-based Avoca Capital for an undisclosed sum. The deal is subject to regulatory requirements, which are expected to be received in the first quarter of 2014.

Avoca was formed in July 2002 by a group of former AIB executives including co-founders Alan Burke and Dónal Daly. It manages about €6 billion worth of assets on behalf of about 200 investors, mostly European pension funds and insurance companies.

Avoca invests across five strategies: European loans and bonds; credit opportunities; long/short credit; convertible bonds; and structured and illiquid credit.

It has 42 staff based in Dublin and 25 in London. These will be combined with KKR’s 11 staff in London under Mr Burke’s leadership.

"Dublin will remain a core part of the combined franchise and both Dublin and London will expand over time," Mr Burke told The Irish Times yesterday.

Mr Burke will report to Craig Farr, who has responsibility for KKR's global credit and capital markets businesses. Mr Farr said KKR was keen to tap into European credit markets and Avoca was a "very good fit" given that there was little overlap in their activities in the region.

He said KKR “knocked on the door” several times and that Avoca’s owners needed “lots of persuading” before a deal was agreed. “This will give us more scale and depth in Europe,” Mr Farr added.

Mr Burke declined to comment on how much the Avoca partners will make from the deal. The Irish company has tended to keep a low profile over the years and only minimal financial information is available for the partnership.

All Avoca employees in Dublin and London are expected to join KKR on the close of the transaction. Investment teams and processes for both KKR and Avoca, including the portfolio management of the respective firms’ strategies, will remain unchanged.

Mr Daly will leave his full-time role with the business but will act as a “special adviser” to KKR after the transaction closes.

Mr Burke said that as European banks had shifted assets to comply with Basel III regulations on capital and leverage, KKR and Avoca could pitch themselves as alternative capital providers for companies in the region while providing institutional investors with the returns they need to pay their pension and insurance obligations.

The combined KKR-Avoca European credit business will have about 80 people and €8 billion of assets.