Elevation Closes $1.8B Fund, Ready To Jam with U2’s Bono

U2 lead singer and geo-political activist Bono may not have found what’s he’s looking for, but he’s helped Elevation Partners close its inaugural fund with $1.8 billion in limited partner commitments.

The Menlo Park, Calif.-based private equity firm will use the fund to acquire media, entertainment and consumer-related companies. A firm spokesman says the fund’s first transaction will be announced shortly.

Elevation was founded in early 2004 by former Electronic Arts Inc. president John Riccitiello and Roger McNamee, co-founder of Integral Capital Partners and Silver Lake Partners. Soon after, it began assembling an all-star general partnership that included Fred Anderson, former CFO of Apple Computer; Mark Bodnick, co-founding principal of Silver Lake; Bret Pearlman, former senior managing director of The Blackstone Group; and Kevin Albert, former head of Merrill Lynch & Co.’s private equity fund placement business.

However, the firm’s most attention-grabbing hire was that of Bono (a.k.a. Paul Hewson), who’s known outside of music for his work with Debt AIDS Trade Africa (to eliminate the debt that poor countries owe the World Bank) and his lobbying at the G8 conferences.

Some prospective limited partners assailed his hire, complaining that rocker Bono has a lack of investment experience and that his many causes, not to mention his rock band U2, would take time away from his Elevation commitments. This was particularly true of public pension fund managers, who would be faced with the additional PR burden of being labeled celebrity worshippers for having a rock star managing retiree investments.

Others reserved judgment, suggesting that Bono’s entertainment industry expertise would outweigh his non-existent private equity track record. Plus, they said, it’s only one partner out of many.

Albert – who moved over from Merrill Lynch to Elevation in the midst of the fund-raising – says Bono was an active part of the fund-raising process.

“Having him was a double-edged sword, because there were certain LPs that just didn’t want to invest because he was involved,” Albert says.

Rather than slinking away from the challenge, Bono became a fund-raising force in his own right, participating in about 80 meetings with potential investors. Many of the meetings were one-on-one, in which his combination of industry knowledge and charm helped secure fund commitments.

“He showed people that he had some real substance and good ideas,” Albert says.

In fact, Elevation ultimately managed to secure a decent number of public commitments, including ones from the Oregon Investment Council, the Teachers’ Retirement System of Illinois, the Washington State Investment Board and the Pennsylvania State Employees’ Retirement System.

McNamee and his partners retained Merrill Lynch in mid-2005 to launch Elevation’s $1 billion fund-raising effort, which later was increased to $1.5 billion. A first close on about $900 million occurred near year-end, at which point a final close was anticipated for late January or early February. That didn’t happen, however, as Elevation instead held a series of rolling closes before the final one, which occurred in August.

Albert says that $1.8 billion was the firm’s upper target, even though a regulatory document indicated that Elevation once considered taking up to $2 billion.

Elevation will mostly focus on buyouts, with average equity contributions of between $50 million and $250 million. It also might back select distressed public companies and buy music or film catalogs. The firm had hoped that its initial deal would be an acquisition of publicly traded U.K. video gamer Eidos PLC (maker of “Tomb Raider”). But the firm lost out to a better offer from SCi Entertainment Group PLC.