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Aberdeen Asset Management team free spirits at last

After more than a year of negotiations with its parent company, Aberdeen Asset Management Private Equity has finally put its troubled history to rest, spinning out to form a new independent buyout business, Spirit Capital Partners.

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After more than a year of negotiations with its parent company, Aberdeen Asset Management Private Equity has finally put its troubled history to rest, spinning out to form a new independent buyout business, Spirit Capital Partners.

Spirit Capital has been launched by former Close Brothers Private Equity investor Francesco Santinon, the man responsible for getting the Aberdeen private equity business back on track when he took charge three years ago. He is supported by fellow partners Andy Glennon and Colin Stirling, who Santinon hired from Bridgepoint in 2006.

A further seven executives from the Aberdeen private equity team have transferred to the new entity, which will continue to be based in London and Leeds.

Spirit Capital has assumed the management of £100m of private equity capital from Aberdeen and will continue to work with its existing portfolio companies.

“The landscape has changed for Aberdeen plc. It is a very large institutional fund management business, predominantly dealing with equities, bonds, fixed income and property. The private equity business is non-core,” said Santinon. “From our perspective it has been clear to us for a while that the norm in private equity is independence and that is what investors prefer.”

Spirit Capital is believed to be in the planning stages of raising a new independent fund and has hired former Bridgepoint head of investor relations Graham Dewhirst as its chairman.

Santinon declined to comment on details of the fundraising or on the shift in carry share that has resulted following the deal.

“One issue all captives have had historically is the share of carry with the parent,” he said. “All I can say is that we have reached an agreement with Aberdeen plc that everyone is happy with.”

Santinon added that Aberdeen had only accounted for ten per cent of the firm's LP capital prior to the split. “We have not been dependent on our parent for funding.”

Spirit Capital will continue to target UK businesses valued at between £10m and £50m, with a sweetspot of between £20m and £25m. The firm is a generalist investor but is currently exhibiting a strong appetite for businesses in the environmental sector. It has recently acquired Birmingham-based Enpure, a specialist provider of process engineering design and services to the waste and water sector, and EDSR, a company which provides land regeneration services to international chemical and industrial corporates and property businesses. It has bid on a number of other assets in the same area, but narrowly lost out, according to Santinon, who added that the firm is also bullish on the healthcare services sector.

The formation of Spirit Capital marks the end of a mixed eight years for the Aberdeen private equity business. It was originally formed as part of the merger of Aberdeen Asset Management with Murray Johnstone, acquired from Old Mutual, in 2000. The integration did not go smoothly and infighting is rumoured to have been rife.

The head of Aberdeen Murray Johnstone Private Equity, Jonathan Diggines, then staged an attempted spin-out in 2004 that was squashed at the last moment, leading to Diggines’ departure.

Santinon was then placed in charge and successfully turned the business's fortunes around, despite the departure of another splinter group, which has since re-emerged as Zeus Private Equity.

Santinon made a series of high-profile hires, including Stirling, and divided the business's private equity limited partnership operation from its VCT growth capital arm.

Aberdeen Asset Management Growth Capital, led by Bill Nixon, will remain with its parent company.

Since Santinon took over, Aberdeen Asset Management Private Equity has made a series of stellar exits including the IPO of Styles & Wood – which reaped the firm a return of eight times its money – and the sale of aerospace components business Brookhouse.

“It is business as usual for us now,” said Santinon. “We are operating in an area that is below the Closes and LDCs of this world, but above the likes of Key Capital and Zeus. It is still a very underserved part of the market and opportunities are rife.”