Each year I like to think back on all the work done over the past 12 months.
This has been a year of strength in the industry — strong fundraising, active M&A, and GPs continuing to give back money to LPs through exits and liquidity events — as you can read in our year-end cover package.
I spent many hours this year talking about and writing about terms and conditions, as the most in-demand GPs used the strength of the environment to set favorable terms. The best example of this was Advent Internationaldropping a preferred return from its eighth flagship fund, which hit the market in the fall. Advent could do this because Fund VIII is seeing heavy demand from LPs and will not have a problem hitting its $12 billion target.
But as for my favorite story of the year, the honor goes to OpenGate Capital, which closed several portfolio companies, laying off hundreds of people, but still enjoyed a strong fundraising for its debut investment vehicle.
This coverage gave a view of the repercussions of the decisions made by private equity. It’s not a view we usually get here at Buyouts, where we try to get as “inside the room” as possible on high-level deals, fundraisings, hirings and firings, and so forth.
What we don’t always see is what happens to the people at the companies and even in the towns where private equity makes its deals.
In January, I reported that OpenGate had shuttered Fusion Paperboard, a company in Sprague, Connecticut. The closure left about 145 people out of work, and closed the paper mill that had operated in the town since at least the 1800s.
My coverage started from an anonymous tip and led me to Cathy Osten, Sprague’s First Selectman, which is basically mayor. Osten is a cheerleader for her town and was bitterly disappointed at the closure. It meant job losses and the loss of more than $200,000 in annual taxes. It also meant the shuttering of a huge industrial facility in a town that had a paper mill for generations, through all kinds of economic cycles.
OpenGate’s decision to close Fusion Paperboard has not chilled LPs’ interest in the firm. They see the returns, like the story and like the team. The firm is in the market raising its debut commingled fund targeting $300 million. Previously, OpenGate invested its own money since its founding in 2005.
This story perfectly illustrates the complexity of this industry: Even in the face of a loss, a GP can still make money. And while that may not be good for workers who lose their jobs, it is good for the LPs, and by extension, the teachers, firefighters and public workers whose pensions depend on GPs’ ability to make money.