Management fees bounty boosts buyout executive pay

Some of Europe’s largest buyout firms have increased salaries shortly after raising new funds in news that is likely to ignite concerns over management fees.

Accounts for BC Partners Limited, for example, show wages and salaries increased 22% for the year ending December 31, 2011, compared with the same period in 2010, hitting £50.2m, while average staff numbers during the year rose by only six to 110.

Turnover went up 8% during the same period to £95.2m, which one US investor said was a result of a rise in management fees on its latest fund, which closed at €6.5bn in February this year.

Accounts for Montagu Private Equity LLP show group staff costs increased to £11.8m in the year to March 2011, up 45.7%, compared with the previous year, despite average staff numbers being up by just one to 65. Costs for 27 partners fell by £700,000 to £6.8m, but the discretionary profit they shared rose from £8.1m to £22.4m.

Turnover doubled from £26.1m to £52.4m, which one person familiar with the matter said was principally due to Montagu holding a final close of €2.55bn on its latest fund in April 2011.

Revenues at Coller Capital Limited – the principal investment adviser to the firm’s funds – rose from £34.4m in the year to March 31, 2011 to £39.5m for the same period this year, driven by commitments to its latest fund, according to a source close to the firm. It held a final close of $5.5bn in July 2012.

Wages and salaries rose from £13.2m in 2011 to £15.1m this year, a 14% rise, despite the average number of employees falling from 110 to 105. The salary of the highest-paid director also went up almost 55% from £324,498 in 2011 to £504,145 this year.

All parties declined to comment. All the accounts were filed at Companies House.

Private equity firms typically have complex structures that involve filing accounts in more than one jurisdiction. But the figures are likely to be of interest to investors.