Brookfield Asset Management is targeting $12.5 billion for a sixth flagship buyout offering, sources told Buyouts, as the firm looks to ramp up its private equity franchise.
The alternative asset manager is hoping to do better, sources said, perhaps raising as much as $15 billion for Brookfield Capital Partners VI. Marketing began in September, Brookfield said in its third-quarter financial results, with an initial close expected in Q1 2022.
Brookfield, which typically makes hefty commitments to its flagship vehicles, is likely to invest $3 billion to $4 billion, sources said. The firm declined to comment.
Fund VI’s launch follows a busy run of post-pandemic dealmaking. Fund V, wrapped up two years ago at $9 billion, has since January led acquisitions of six companies, with a total equity invested value of $7 billion.
This amounts to “our most active year to date,” Cyrus Madon, managing partner and head of Brookfield’s private equity group, said.
The largest of the investments, the $5.8 billion carve-out of the lottery services and tech unit of Scientific Games, was announced last month. Brookfield was attracted to the opportunity, Madon said, because of the increasing role played by lottery revenue in public-sector spending.
Earlier, Brookfield acquired US advanced chassis tech supplier DexKo for $3.4 billion and European modular leasing services provider Modulaire for $5 billion. It also bought Brazilian solar power kits distributor Aldo for $295 million.
This activity touches on themes emphasized by Brookfield since 2016, when Fund IV closed at $4 billion. An operationally focused control strategy for the North American mid-market was then converted into a global strategy of pursuing bigger transactions in diverse geographies and industries.
Fund V stepped-up things further, deploying a total of $16 billion with the help of co-investors, including Brookfield Business Partners, a listed platform. The fund, nearing full investment, mostly sources deals valued at $1 billion to $13 billion across business services, industrials and infrastructure services in the Americas, Europe and Asia.
Brookfield’s latest flagship vehicle will maintain the approach taken by Funds IV and V, with a potentially larger capital pool allowing for more deals at roughly the same range.
Adding healthcare and tech
Brookfield plans to tweak the strategy by “expanding our reach into new sectors,” Madon said. Under Fund VI’s banner, it will dive into the red-hot healthcare and technology spaces to locate cash-intensive, high-growth service providers.
Brookfield laid the groundwork for this initiative with a pair of debut deals, among them the 2019 acquisition of listed Australian hospital operator Healthscope for $4.1 billion.
Healthscope whet the firm’s appetite for more investing in an industry with “enormous tailwinds,” such as an aging population and advances in medical science, Madon said. It has since explored opportunities in areas like medical devices, equipment and consumables manufacturing and outsourcing.
A first software investment was made this year, with Brookfield buying Everise, a Singapore customer experience solutions company. The $360 million deal was influenced by Healthscope, as Everise has a substantial healthcare customer base.
Brookfield is interested in tech that “has similar characteristics to the service businesses we have invested in,” Madon said. It is now working a post-Everise pipeline in application and infrastructure software, digital services and traditional IT services verticals.
To develop its tech capabilities, the firm in March hired Doug Bayerd, a former Marlin Equity Partners principal, as managing director.
The transition to a net-zero economy, a key Brookfield theme, also will be a priority, Madon said. This will involve doing more deals like Modulaire, whose flexible workplace solutions have “a low-carbon footprint.”
Beefing up private equity
The five-year build-out of the flagship buyout strategy is one component of a major expansion of Brookfield’s $91 billion PE platform. The goal, Madon said, is to make private equity “the same size and scale” as the firm’s most established platforms, such as infrastructure and real estate.
Another component is the launch of new strategies. Brookfield Capital Partners was recently joined by Brookfield Growth Partners, a tech-focused growth strategy led by managing partner Josh Raffaelli, and Brookfield Special Investments, a large-scale non-control strategy led by managing partner David Levenson.
A debut special investments offering is in the market, earlier this year collecting $2.4 billion against a $5 billion target, Buyouts reported. A second growth vehicle closed this month at $500 million-plus, with a third expected to roll out in 2022.
A fourth strategy, oriented to long-term deals, is now being designed, Brookfield said in its third-quarter letter to shareholders. It is not clear when fundraising will get underway.
Broadening the franchise makes sense as private equity is “the highest performing” of Brookfield’s alternative assets, sources said. Over two decades and five funds, PE investments were as of September earning a gross IRR of 28 percent, the firm reported.
Madon oversees a global investment team of about 150, three times the number in 2016. Along with Brookfield’s Toronto headquarters, professionals operate from nine offices, including London, Mumbai, New York, São Paulo, Shanghai and Tokyo.