Firm: Bain Capital
Fund Name: Bain Capital IX
Fund Size: $8 billion
Co-investment Fund: $2 billion
Last Fund: Bain Capital VIII, raised 2004, $3.5 billion with $750 million co-investment fund
It’s an impressive leap in fund size, but Bain Chief Operating Officer Mike Goss says people shouldn’t be surprised. The firm invested all of its 2004 vintage fund VIII and the fund VIII co-investment fund of $750 million in a mere 21 months. Since Bain designs its funds to last four years, that fund should have been over $7 billion.
“We’re not asking anyone to believe we’re increasing our investment rate. For the last three years, we’ve been investing at a rate that easily justifies this fund size,” said Goss.
Goss said he was surprised that the last fund invested so quickly, but a number of conditions made it possible: availability of credit, a healthy economy and and club deals have made it possible to do much larger deals. By dollar volume, about one third of the deals out of Bain’s last fund were club deals, though there wasn’t more than 10% overlap with any one firm, said Goss.
“We don’t raise funds with the intention of investing them in two years,” he said. Goss added that the larger fund size does not in any way change Bain’s strategy. “Fund VIII was undersized relative to our market power and opportunity. Now we have a fund that should last three to four years.”
About $1 billion of the latest fund is already spoken for, through three deals Bain has signed on to in the last several months: Burlington Coat Factory, the sensors and controls business of Texas Instruments and Dunkin’ Donuts.
Bain’s top executives believe the advantages can be many by doing larger deals. Larger companies are more financiable, better run, and there is less competition to buy them. Bain managing director, Steve Pagliuca said, “In the upper end of the market, there’s more rationality. The companies are generally better managed, but the upside can be just as great. There’s only a handful of funds right now that can write a check for a billion dollars. We’re one of them.”
Other firms that have closed $10 billion funds this year or are expected to close them include,
Bain went to existing LPs for the fundraise, which took somewhere between two and three months, said Goss. The $8 billion main fund closed on March 31, while the co-investment fund closed April 7. Bain’s stable has historically been wealthy individuals, endowments and families and big pension funds. That remained the case with this fund.
“If we didn’t think we could invest this much money in attractive opportunities over the next four years, we wouldn’t have raised it,” said Goss. “It’s not the size of the fund that changes the opportunities in private equity, it’s the opportunities in private equity that change the size of the fund.”—M.C.