The buyout of PPM Capital, one of Britain’s oldest private equity firms, is running more than a year behind schedule after severe complications in separating from its parent, Prudential, the insurer, and a lack of investor appetite for a new fund.

PPM, the firm behind the buyout of the Chéz Gerard and Caffè Uno restaurant chains, was supposed to separate from the Pru and finish raising a new €1 billion (£679 million) fund by the end of the first quarter.

However, The Times understands that the fund is only now ready to close its first round of fundraising at €500 million after months of negotiations with investors and that the spin-off still has not taken place.

“It has taken a long time,” one source close to the buyout said. “The fundraising has been much harder than we would have hoped.”

Until now PPM has been wholly owned by the Pru and has invested only the insurer’s money. However, its managers, led by Neil MacDougall, want to enjoy the same autonomy and flexibility as other private equity firms.

It was not immediately clear how much they would pay for the business, which has assets under management worth about £600 million.

One of the main reasons cited for the delay has been the complication of extracting the business from Prudential. PPM is part of the Pru’s M&G asset management business and the private equity group’s assets sit within the life insurance fund that is owned by M&G.

Senior Prudential management have been slow to engage with the process, one source said. Although the high-level terms of the separation were agreed early on, “the devil has been in the detail,” he said. “It’s been hard to get their time and attention.”

Complications have arisen over how to extricate the PPM team’s pensions without leaving a deficit at the rest of the group. There have also been problems in transferring leases of offices and agreeing terms of a management contract for PPM’s assets, which will remain within M&G’s life fund but will be managed by the new team.

On top of that, investors have been slow to subscribe to the fund because of the already crowded nature of the mid-market, which includes successful competitors such as Bridgepoint, Barclays Private Equity, HG Capital and Duke Street.

Although the PPM team has a strong track record, “a lot of investors’ capital has been used up,” another source said. Of the €500 million in the first close, it is understood that €250 million will come from M&G, while PPM partners will stump up a further 1 per cent of the fund, or €10 million, between them. The delay means that the full fund will not now be closed until some time in the first quarter of 2008, which is more than a year behind schedule.

PPM is hoping that the first close of its fund will help to give the group momentum and encourage other investors to participate in the second round. In addition, some investors in the first round, including Bank of Scotland, have also pledged to contribute in the next round.

PPM’s move comes after a string of other buyout companies sought independence from their parent firms. Montagu was spun off from HSBC and Bridgepoint was formerly NatWest Equity Partners. Permira was spun off from Schroders, BC Partners from Barings and CVC from Citigroup.

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