As if it wasn’t crowded enough in the mega fund arena, there soon may be a new buyout group in town sporting a $1 billion plus fund of its own.
Former Goldman Sachs partner Christopher Flowers is raising a $1.5 billion private equity fund to exclusively make investments in the financial services industry. Accompanying Flowers in the venture is David Schamis, formerly of Salomon Smith Barney and Jacob Goldfield, a former managing director at Goldman. The yet-to-be-named group will be operating out of their office on Park Avenue.
Barely out of the box, the group has already secured commitments from Chicago-based Banc One Corp. and Spain’s Banco Santander in the amount of $250 million each. The fund will be seeking investments from other “large, strategic investors,” said Schamis. “Chris has very good relationships with a lot of the major financial institutions,” he said.
All Financial Services, All the Time
“There are some firms out there like KKR that do everything including financial services and there are other firms that specialize in specific areas like insurance,” said Schamis. “We are going to do financial services across the board because we believe that it’s a relatively underserved market in the private equity world.”
He added that, looking at the financial services market capitalization worldwide versus the industrial market cap, the numbers are out of balance. Approximately 30% of the world’s market cap are financial services companies.
“I’m sure that much less than 30% of private equity funds raised are earmarked for investing in financial services companies,” he said.
The group will look to make investments in Europe as well as the U.S. and will join the long list of $1 billion plus funds already in the market including the recently closed Thomas H. Lee Co.’s $6.1 billion fund, Kohlberg Kravis Roberts $ Co.’s Millennium Fund, targeting around $6 billion and J.P. Morgan Chase & Co.’s ambitious $13 billion offering.
In addition, the fund will be looking to but not limited in taking controlled positions in transactions. The group is also in the midst of recruiting more personnel for the new vehicle. “We’re going to have six to 10 partners and principals,” said Schamis.
The new fund will hold a first close within the next two or three months.
Schamis’ relationship with Flowers dates back to the 1999 acquisition of Japan’s Long-Term Credit Bank by Ripplewood Holdings LLC for approximately $1 billion (Buyouts Dec. 6, 1999, p. 6). Flowers was instrumental in helping Ripplewood secure a close for the transaction and Schamis’ Salomon Smith Barney served as adviser to the buyers.
While the group will not be looking to formally team up with Ripplewood Holdings on any transactions, the two firms would look at deals together if it made sense to, said Schamis. “Tim Collins and Chris have a great relationship and speak to each other very frequently,” he said.