Count Advent International among the winners in this latest fundraising cycle. The Boston-based, global firm closed on $3.3 billion for its latest fund, Advent International GPE V LP, representing a more than 70% increase over its predecessor Fund IV.
Advent could have raised more, and ultimately the fund was nearly $2 billion oversubscribed, but Advent didn’t want to give the impression that it was straying from its mid-market mandate. “You can’t help but say, Gosh it would be great to raise a much larger fund,'” Advent Managing Director David Mussafer said. “When you look at the strategy we’ve employed, we’ve been able to expand the franchise… and we’ve continuously grown the fund, but we haven’t outgrown our fund size.”
Advent joins a chorus of its peers that despite raising billion-dollar-plus funds will remain dedicated to the middle market. Golden Gate Capital, for example raised $1.8 billion for its second fund last year, while Code Hennessy & Simmons held a $1.3 billion close on its fifth fund. Meanwhile, Sun Capital Partners just closed a $1.5 billion fund and Summit Partners is reported to be in the market with a target of $3 billion. But like Advent, the larger fund sizes will not automatically result in larger deals.
However, even as Advent is keeping to its mid market roots, the firm is hoping that its larger fund size will allow it to reach higher for deals when the need arises. The firm has gone after the billion dollar deals in the past, and with more capital at its disposal, it wants to be considered for larger deals that fit into its strategic focus. “There are situations,” Mussafer said, “where we’ve gained certain expertise and we might be able to flex up if it’s in our sector [focus].”
Typically, though, Advent will still target deals with a $100 million to $500 million enterprise-value range, and will make equity investments of between $20 million and $200 million.
Throughout the fundraising process, which started last October, Advent made a concerted effort to meet new limited partners. Forty six percent of the capital came from North American LPs, while 38% came from European investors. Mussafer estimated that in previous Advent funds European limiteds did not exceed 25 percent of the commitments.
“We really made an effort to build our investor base in Europe,” he said. “We’ve got a very large operation there and it is such an important part of our investment activity today… that we wanted a limited partner base to reflect that.” Mussafer added that there’s an increasing appetite for private equity among European institutions, and that helped the firm corral investments there. The balance of Fund V’s commitments, totaling 16%, came from Asia and the Middle East.
Like many of the brand-name funds in the market today, Mussafer found the limited partner community to be very accommodating and eager to commit to the asset class. “There was more demand than we could satisfy… It is a very strong marketplace right now and a lot of groups will be successful [fundraising] in this environment.”
However, while there is certainly plenty of institutional capital available, Advent’s strong track record likely played a major role in the firm’s success. According to the California Public Employees Retirement System, Advent’s previous fund, the 2002-vintage Advent Global Private Equity IV A, has registered a net IRR of 18.2 percent. The firm’s two previous fund’s meanwhile, GPE III and GPE II, have registered IRRs of 7.14% and 21.84%, respectively, according to data released by the Massachusetts retirement system last year.
But even with a string of positive returns, Mussafer credits the firm’s global approach for stoking investor enthusiasm. “The high returns obviously catch people’s attention, but what I think sold investors is that they are achieved on a systematic basis.”
Advent identified a number of its larger investors, including GIC Special Investments, Canada Pension Plan Investment Board, AlpInvest Partners, State of Michigan Retirement Systems, the California Public Employees’ Retirement System and funds managed by Standard Life, Pantheon and Partners Group.
Last quarter, Advent also closed a separate fund, Advent Central & Eastern Europe III LP, which took in R330 million in limited partner commitments.