Canaccord Genuity  

SVG standoff shows trust M&A risk

“One of our long-term overweight recommendations, listed private equity has outperformed since markets went into recovery mode in 2009 but, inexplicably, discounts have remained stubbornly wide,” Mr Brierley wrote in September.

“We agree with HarbourVest that the experience during the global financial crisis continues to overshadow the industry.”

Mr Elliott agreed that private equity funds had been trading at the wrong price “for some time” but added that corporate activity may not follow.

“That does not necessarily mean a wave of takeover bids is coming but we suspect that some boards will be having a close look at their prospects. Do retail investors really want these funds?” he asked.

Key numbers

11.5%: SVG discount as of October 3, according to Winterflood

16.2%: Average discount for the direct private equity trusts

Pros and cons of SVG Capital’s suitors

The offers for SVG Capital have taken a number of manifestations in the last month, each arguably with different pros and cons.

In mid-September, HarbourVest offered 650p per share, but warned the offer was “expressed to be final”.

This was followed by a second major proposal, for SVG to sell half of its investment portfolio to Pomona Capital and Pantheon Ventures for £379m, accompanied by a planned £450m tender offer at 700p a share before the end of 2016.

HarbourVest warned that these plans “begin and end with complexity and conditionality, offer little clarity as to value, are non-binding and carry significant market and execution risk”.

The third proposed, a sale of the entire investment portfolio to Goldman Sachs Asset Management and the Canada Pension Plan Investment Board for around £748m would equate to 680p a share. 

However, on October 8 HarbourVest promised its bid would be structured in line with the Goldman Sachs and CPPIB deal leading to further uncertainty.