Beefed up Madison Dearborn team launches Fund VIII at $4.5 bln target

Madison Dearborn Partners launched fundraising for its eighth flagship fund, setting a goal of $4.5 billion, according to an SEC filing.

Madison Dearborn Capital Partners VIII is targeting slightly more than the $4.4 billion secured by Fund VII, which closed in 2016 at its hard cap.

If the new fund meets its target, it will be the Chicago-based private equity firm’s second-largest to date. The biggest, Fund V, raised $6.5 billion in 2006.

Fund VII was backed by a range of global limited partners, according to MDP’s website, including endowments and foundations, family offices, pension plans and sovereign wealth funds. Investors included Maryland State Retirement and Pension System, Minnesota State Board of Investment, Teachers’ Retirement System of the State of Illinois and the University of Michigan.

A spokesperson for MDP declined to comment on its fundraising activity.

MDP makes control and minority investments in North American mid-market companies, with an especially strong deal pipeline in the Midwest. The firm focuses on five sectors: basic industries; business and government software and services; financial and transaction services; healthcare; and telecom, media and tech services. A sixth vertical, consumer—a long-time focus—was dropped in 2017.

Fund VIII will maintain the strategy pursued by its two predecessors, a person with knowledge of the matter told Buyouts. Over MDP’s first seven funds, roughly 70 percent of deployed capital has gone to buyouts and 30 percent to growth equity, a split that is expected to continue in the latest vehicle, the source said. The firm generally invests in 15 to 20 companies per fund.

MDP recently added to its senior bench. Last year, the firm hired Michael Dolce, formerly with Bank of America Merrill Lynch, to head a new capital markets group, which aims to build relationships among global sources of financing. In January, it also recruited Josh Damon, formerly with Ankura Consulting, to head a new portfolio resources function supporting the growth of businesses through operational improvements.

The hires brought MDP’s managing directors to 18, 12 of them leaders of the five sector groups. Chairman John Canning and co-CEOs Paul Finnegan and Samuel Mencoff, who co-founded the firm in 1992, oversee the entire team.

Other founders include James Perry, who co-heads telecom, media and tech services; Timothy Sullivan, who heads healthcare; and Nicholas Alexos and Robin Selati, who stepped back from their leadership roles in 2017.

MDP’s new investments this year include InMoment, a Salt Lake City-based customer experience management platform, and Lightspeed Systems, an Austin-based education tech solutions provider.

MDP this year also sold Fleet Complete, a Toronto-based connected-vehicle tech company, to Ontario Teachers’ Pension Plan, and agreed to sell LGS Innovations, a Herndon, Virginia-based cybersecurity and communications specialist, to CACI International. The firm stands to earn 5x its money on the LGS deal, Buyouts reported in February.

Madison Dearborn Capital Partners VI generated a net multiple on invested capital of 2.12x and a net IRR of 23.69 percent as of June 30, according to Preqin data.

Action Item: See Madison Dearborn Partners’ ADV filings here.