Boston Shop Eyes $1.25B Hard-Cap For Fund IV

Executives at Great Hill Partners, expect to close their fourth buyout fund, earmarked for growth capital and majority investments in the business services, consumer services, media, communications, and software industries, in the first quarter at the fund’s hard cap of $1.25 billion, sources familiar with the fundraising effort told Buyouts.

The Boston-based firm has already beaten its initial target of $1 billion for the fund, having raised $1.1 billion thus far. Sixty institutional investors signed up for Great Hill Equity Partners IV LP, including the Pennsylvania State Employees’ Retirement System, which in June committed $25 million, and the Maryland State Retirement & Pension System, which committed $50 million. Thirty six out of 45 investors from the firm’s third fund re-upped. Those investors represented 85 percent of the capital in Fund III.

The firm typically writes equity checks of $60 million to $75 million for companies with enterprise values of $100 million to $500 million. It is known for not using excessive debt to drive returns: It bought six of 11 companies in Fund III with straight equity. Great Hill Partners will also take minority stakes in companies, including private investment in public equity, or PIPE, investments. It typically holds companies three to seven years.

Great Hill Partners’s most recent deal came in late July, when it partnered with Spectrum Equity to buy Passport Health Communications Inc., a Franklin, Tenn.-based health care technology company.

The sizes of Great Hill Partners’s funds have dramatically increased since Managing Partners Christopher Gaffney, Stephen Gormley and John Hayes founded it in 1999. Its first pool of capital, Great Hill Equity Partners LP, totaled $330 million. That was followed in 2001 by Great Hill Equity Partners II at $460 million and in 2005 by Great Hill Equity Partners III at $750 million. The firm has 24 investment professionals.

Officials at the firm didn’t respond to requests for comment.