Editor’s Letter: First-time megafirm set to bust its way into the market

Alex Navab earlier this month launched his new firm, Navab Capital Partners. The announcement did not mention a fund, but I reported back in February that the chatter among LPs at the time was the debut fund could target $3 billion to $4 billion.

Sources tell me Navab’s likely target would be $3 billion, if and when a fund actually hits the market. That hasn’t happened yet and it’s not clear when it might. It’s also not clear what kind of cap the fund would have on it.

Without a fund, Navab and his team of megadeal makers will look for opportunities on a deal-by-deal basis, Navab told me: “If we find opportunities, we’ll then try to raise capital for those opportunities. There’s a lot of capital available if you find the right deal and have the right team to identify it.”

Navab Capital is being cautious in this high-priced environment. The firm is targeting investments across healthcare, tech, media, fintech and consumer. Navab said he expected the environment to cool off in the next couple years, at which point valuations in general would be more attractive.

Unique: If Navab does raise a fund of $3 billion or more, it would be one of the largest such pools ever. I’m not sure if there has been a first-time fund of that size. One of the largest first-timers was Arcline Investment Management, which closed its debut fund in March on $1.5 billion.

First-time funds can command outsized demand when they’re launched by big-name private equity executives. Arcline was formed in 2018 by Rajeev Amara, who  wored at Golden Gate Capital from 2000 to September 2018.

Navab built an impressive roster of dealmakers, including Ram Jagannath, who formerly focused on healthcare at Carlyle Group; Annette Rodriguez, who joined from Warburg Pincus where she focused on consumer, retail, healthcare, industrials and business services; and Robert Berlin, who focused on consumer, value-add industrials, tech services and financials at Baupost Group.

This is unusual as most first-time funds face a fundraising slog that can stretch up to two years. Anecdotally, I’ve heard of LPs approached with new opportunities this year who have already expended their 2019 private equity allocation on re-ups and established relationships (as a reminder, it’s April). This is the daunting environment a first-time fund has to navigate.