Departure Dims Elevation’s Marketing Prospects

Kevin Albert has left Elevation Partners to join Pantheon, a private equity fund-of-funds investor, raising the prospect that the troubled Elevation Partners will not be marketing for a second fund anytime soon.

Albert will be a partner at Pantheon and global head of business development. Based in Pantheon’s New York office, Albert also will join Pantheon’s executive committee, the firm said in a press release. Affiliated Managers Group, a publicly traded buyer of interests in mid-sized investment management firms, bought Pantheon in June.

Albert joined Elevation Partners at its inception in 2005 along with a group of high-profile investors, including Fred Anderson, a former executive vice president at Apple Inc.; Marc Bodnick, a founding principal at Silver Lake, and Roger McNamee, a co-founder of Silver Lake; Bret Pearlman, a former Blackstone Group senior managing director; and Bono, the lead singer of the rock band U2 and a global humanitarian activist.

As a managing director at Elevation Partners, Albert helped raise the firm’s first fund, an estimated $1.8 billion vehicle to invest in media and entertainment businesses. After accounting for reserves, which firms typically use for potential portfolio infusions, Elevation has about $100 million left to invest, a source told peHub, a sister Web site to Buyouts.

Elevation Partners has invested $300 million into the business publisher Forbes and its associated Web sites, $460 million into the mobile-phone company Palm Inc. and $210 million into the social network Facebook through two investments: $120 million in November 2009 and $90 million this past spring. The firm also has committed to invest up to $100 million to the Internet business directory and review site Yelp for about 20 percent. Another $100 million is going to Pandora, the Internet radio station provider, a source said. Once Pandora closes (and it isn’t clear when that will happen), don’t expect Elevation to invest in any portfolio companies in the near future, the source told peHub.

Elevation Partners did not get an extension on investing the $1.8 billion fund, peHub confirmed, as reported earlier by the TechCrunch technology blog.

Elevation Partners’s highest-profile exit was from Palm, which technology giant Hewlett-Packard bought in July for $1.2 billion. But having invested $460 million, or roughly 25 percent of its fund, in the publicly traded Palm, Elevation Partners earned a scant investment multiple of about 0.05x on its $485 million exit.

The Oregon Public Employees Retirement Fund reported that its investment in the Elevation Partners fund posted a -9.9 percent IRR as of March of this year.

On paper, the Facebook investment would give Elevation Partners a 2.5x return there, but Mark Zuckerberg, the founder of the world’s most widely used social networking site, has shown little interest in an IPO for the company, which launched in February 2004.

Elevation Partners has had a successful exit. In late 2007, Electronic Arts bought VG Holdings, which owns BioWare Corp./Pandemic Studio, from Elevation Partners for $860 million. The private equity firm invested $300 million and the exit was valued at 2x return, a source says.

If Elevation Partners does return to the fundraising market, it is not likely to occur before another successful exit or two, the source said. A second fund probably would be smaller than the first and with existing investors, one private equity exec said.

Executives at Elevation declined comment.