Evercore Capital Likely Won’t Raise Fund III

Evercore Capital Partners, the investment arm of the boutique investment bank Evercore Partners Inc., will most likely not raise a third fund under the Evercore name, and executives at Evercore Capital are not planning to branch out independently any time soon, according to a source.

In May 2008, Evercore Capital delayed raising its third fund, which was targeted to raise $700 million for buyouts of mid-market companies with enterprise values of at least $100 million, after co-founder Austin Beutner retired following a bicycle accident.

During the financial crisis that followed, the firm decided to continue to delay Fund III and to focus on its existing portfolio. Evercore Capital’s situation was further clouded in February, when its parent took a minority stake in Trilantic Capital Partners, the former buyout arm of Lehman Brothers. Our source said Evercore Partners made that minority investment in part because Trilantic Capital already had capital raised, thus allowing it to avoid the difficult fundraising market.

The Evercore Capital team continues to look at new deals with the support of a few select limited partners, our source said. The firm’s most recent platform investment came in March 2008, when it bought Bollinger International, a Short Hills, N.J.-based insurance broker, for $250 million.

The Trilantic Capital and Evercore Capital teams also coordinate on deals. For example, the Trilantic Capital team, which is managing a $3.3 billion fund, might refer the Evercore Capital team to a deal too small for its fund. Likewise, the Evercore Capital team might refer a deal too large for its $663 million fund to Trilantic Capital.

Executives from the parent, Evercore Partners, declined to comment.

Evercore Capital continues to manage its portfolio of seven companies. In May, the firm sold Sedwick Claims Management Services Inc., a provider of claims administration and related cost management services in the area of worker’s compensation, to Hellman & Friedman LLC and Stone Point Capital LLC for $1.1 billion. The exit scored Evercore Capital a 2x return on its invested capital.

Evercore Capital has six investment professionals. At the time of the investment in Trilantic Capital, Evercore Partners put in place a series of incentives for Evercore Capital professionals, tied to the performance of their existing portfolio. The firm continues to share office space with its parent in New York, while Trilantic Capital maintains its own office, also in New York.