Bain Capital is running out of money.
Such a statement may seem a bit overdramatic, but the firm certainly is running low on the $10 billion it raised just this past spring. That effort included an $8 billion general fund and a $2 billion co-investment vehicle, with Bain telling limited partners that the money would last far longer than the 21 months it took to blow through its $4.25 billion predecessor pool.
“We don’t raise funds with the intention of investing them in two years,” Bain CFO Mike Goss told PE Week at the time. “[The previous fund] was undersized relative to our market power and opportunity. Now we have a fund that should last three to four years.”
Bain LPs say that the $10 billion fund was about 30% called down as of Sept. 31, spent on such deals as Dunkin Donuts and Burlington Coat Factory. Since then, it has closed on HCA (approximately $1.2 billion from Bain) and Michaels Stores (about $1 billion from Bain)—and is on the hook for OSI Restaurants and Clear Channel.
In other words, well over half of its $10 billion fund is committed. At this pace, it should be out of dry powder by the second quarter of next year—or about 15 months since holding a final close.
Sources inside and outside of Bain say that the firm has little appetite for raising another fund so close on the heels of its last one. Neither is it interested in some sort of public flotation, such as the KKR Euronext offering. Instead, it has discussed more conventional options, which could include a profit reinvestment, an annex fund or an expansion of its current fund size with existing and perhaps also new LPs.
No formal action is expected to be taken until early next year.
A Bain spokesman declined to comment.
Some Bain critics suggest that this capital crunch is the inevitable end result for a firm that rarely sees a deal it doesn’t like. There is some truth to that line, although the reality is that no LBO firm has done a good job managing the current dealflow gusher. Blackstone, KKR and Thomas H. Lee Partners are among those that have increased their fund-raising targets this year, and could very well do so again. Bain is no different, only more recent.—Dan Primack