LONDON - Merrill Lynch & Co. has agreed to let executives take over its European private equity management business, which will switch its focus to selling funds as management pay pressures rise.
Under a revenue sharing agreement, executives will close the 13-year-old Mercury Private Equity unit, which manages $984 million for investors, and open a new company. Merrill will get a share of the fees generated from its clients. Further terms were not disclosed.
Merrill's move follows similar spinoffs by its rivals. National Westminster Bank PLC, now owned by Royal Bank of Scotland PLC, sold NatWest Equity Partners, renamed Bridgepoint Capital, to executives in December.
"The big boys are finding that running private equity isn't core to what they want to do," said Richard Eliot-Lockhart of Matrix Securities, a London funds retailer. "It's an increasingly high cost, labor intensive, low-margin business."
Merrill is giving up ownership of a company that Acquisitions Monthly in February ranked among the 10 biggest investors in start-up firms.