Bucking an industry trend that has decreed of late that it’s better to close a fund early and under target than not to close at all, Credit Suisse First Boston Private Equity last week topped off its third fund, DLJ Merchant Banking Partners III, with a whopping $5.4 billion in commitments.
Prior to CSFB’s acquisition of Donaldson, Lufkin & Jenrette in mid-2000, the latter had already raised $3.2 billion, but then suspended fund-raising activities because of the merger. After working out the kinks that often result from such combinations, CSFB resumed DLJ’s fund-raising efforts in March and raised the remainder of Fund III.
Although raising just $3 billion would have qualified it as one of the largest funds of the year, that just wasn’t enough for CSFB. “We are very pleased … Our initial target was $3.5 billion, although our goal was really $5 billion,” said Thompson Dean, head of CSFB’s leveraged corporate private equity business and Fund III’s managing partner.
Considering DLJ’s fund-raising history, that its third fund was oversubscribed is less than surprising – the firm has steadily increased the size of each of its funds over time. In 1992, DLJ raised a $1 billion investment vehicle, and, in 1997, it closed a $3 billion fund. DLJ made investments from that fund until the capital dried up in 2000, prompting the firm to go out and raise its latest investment vehicle.
Fund III is expected to follow the strategic path of its predecessors, with a few minor changes. “We’re executing the same strategy, but we are seeking broader diversification in more defined areas,” Dean said.
The fund’s areas of focus will include the health-care industry, the energy sector, the media communications arena and financial institutions, with roughly 30% of the cash funding industrials.
Additionally, about 20% of the fund will go to overseas companies, mainly those located in London, which should not be difficult because the firm maintains offices there, as well as in New York, Buenos Aires, Hong Kong, Tokyo, Sao Paulo, Chicago, Los Angeles, Menlo Park, Calif., and San Francisco.
The average investment will range from $100 million to $150 million, but Dean said CSFB is willing to pump as much as $500 million into one transaction, if necessary, in order to get a good deal on a leveraged buyout.
To date, CSFB has already committed $1.5 billion from the fund. Two insurance companies, Atlas Specialty Limited and Montpelier Insurance, have reaped the benefits, along with Noveon, the chemical division of BF Goodrich. According to Dean, each company received north of $100 million from CSFB.
While Dean declined to reveal the firm’s LPs, he said that most of the fund’s capital comes from blue chip groups, state funds, endowments and wealthy individuals. Additionally, CSFB is said to have supplied 20% of the capital in the fund, while other investors reportedly include The New York State Teachers’ Retirement System and the Colorado Public Employees Retirement System.
Danielle Fugazy can be contacted at: Danielle.Fugazy@tfn.com”>