Dear Investor, With Profound Regret Alchemy is not what it was. We have lost investment capacity from £400m pa a few short years back to a likely £100m pa within the next year. This loss reflects a number of factors – one is simply the general market where our Plan represents a readily reduced commitment in a market where over commitment is a major issue. More significantly team issues at Alchemy, very low new deal activity and a weak overall investment performance, with continuing losses and largely defensive investing, have drained confidence. The firm has two better areas of investment. In turnaround we have a market leading reputation, a strong realised record and a promising portfolio. The market is much slower than expected as the banks “internalise” their portfolio issues – but a large market will appear shortly. Only yesterday our position for the current market was described as “Perfect” by the global head of private equity of a big 4 firm! In financial services we have 3 realised deals (all turnarounds) with very good outcomes and a large unrealised portfolio which seems likely to be respectable. We have done no new deal in this area for well over 2 years. It is a small component of the UK PE market and would justify only a small fund on its own. And a small fund would not have been able to do much of our past portfolio. Dominic Slade now wishes to convert the firm to a specialist financial services firm. I do not support this strategy. It’s contrary to the positioning we have created with investors and deal sources and wastes a spectacular opportunity in our area of perceived greatest strength. It likely adversely affects the partnership economically. Dominic is supported in his view by three other partners. One has been with the firm for some years and has led several deals. He has a record of one write-off but as yet no profitable exits on deals he led. The other two partners have joined in the last year or so – neither has yet led a new deal. Dominic was appointed Managing Partner of Private Equity some two years ago. He was the best available internal candidate given the situation we were in. There were reservations and actions taken to try to deal with these – a mentor for example. There have been continuing concerns as to his performance shared with Dominic, the Advisory Board and the Plan Manager. Events and performance mean that I am afraid that I am unable to recommend that Dominic succeed me. I very much wish I could. I hope he proves me wrong. He is certainly well capable of executing good deals. As you are aware I had indicated that I would retire at my sixtieth birthday next October but given my unwillingness to support the investment strategy or Dominic’s role this is not sensible. I have today served my resignation upon the Partnership and am seeking the earliest possible release of my contractual obligations. This action has been taken with considerable consideration. I will leave behind some good people and take away some great memories. I feel I owe investors an apology for quite a few things. Together with my partners past and present I made too many investment and people errors. The state that the firm is now in leads to the view that the best solution for investors and the partnership is an early orderly Plan termination. The Plan’s economics are no longer favourable. Investors need proper arrangements for portfolio work out. A proposal for this is under consideration by the Plan Manager. I personally have very substantial – much more than the other partners combined – amounts committed and invested in Alchemy’s funds both as GP and LP. I am the largest carryholder in all investments and the only remaining significant one in some. So I can say with financial sincerity as well as paternal sincerity that I hope things turn out well for Alchemy. It may be that my action today will catalyse a better outcome than would otherwise happen. I expect to be in further touch shortly. Thank you for your past confidence and support. I would do it again – but better. Yours sincerely, Jon Moulton
Jon Moulton’s resignation from Alchemy has sent shockwaves through the private-equity industry. What do you think about his resignation letter? Post your comments below.
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