Genstar targets $11bn in rollout of latest flagship buyout fund

Genstar Capital launched an 11^th mid-market buyout fund amid expectations of a tougher fundraising market in the year ahead.

Genstar Capital Partners XI, unveiled by the San Francisco private equity firm last month, is seeking $11 billion, a report prepared for Teachers’ Retirement System of Louisiana said. Evercore is the placement agent.

The new vehicle comes almost two years after the closing of Fund X at $10.2 billion, above an original target of $8 billion.

Against a backdrop of economic uncertainty, fundraising in the North American market began to slow last year, as overstretched LPs erected supply barriers to proliferating products. These conditions are expected to continue or worsen in 2023. Because of this, some GPs are moderating the pace of their capital raising and rethinking step-ups in targets.

Top-tier sponsors will probably continue to hit their targets, even as they boost their ambitions. This may well include Genstar, which, as of September 2022, was earning an aggregate net IRR of 34.6 percent across its five prior flagship funds, according to TRSL documents.

Genstar was established in 1988 by Angus MacNaughton, Richard Paterson, Ross Turner and John West. It was named after a building materials and financial services company previously run by the founders.

Today, the firm is led by five managing partners: president Ryan Clark, chairman Jean-Pierre Conte, Rob Rutledge, Tony Salewski and Eli Weiss. Clark, who joined in 2004 from Hellman & Friedman, was appointed to the top job in 2015.

Genstar makes mostly control investments in North American mid-market companies, typically with positive cash flow and at least $25 million of pro-forma EBITDA. Preferred opportunities, such as founder-owned businesses, public orphans, carve-outs and traditional buyouts, are sourced thematically across four core sectors: financial services, healthcare, industrials and software.

Fund XI will maintain the strategy, targeting 15 to 18 investments in platform companies with values of $400 million to $2 billion, TRSL materials said. Equity check sizes will range from $250 million to $1 billion.

Genstar, which has a portfolio of more than 40 active investments, kept a steady deal pace over 2022. In November, for example, it announced joining GTCR as an investor in Jet Support Services, an aircraft maintenance support and financial tools provider. Shortly before, it said it would invest in Likewize, a technology protection and support company backed by Brightstar Capital Partners.

The firm also acquired Numerix, a capital markets risk management technology provider, and led the recapitalization of Cerity Partners, a wealth management business backed by Lightyear Capital. Exits last year included a majority interest in BBB Industries, an automotive, industrial, energy storage and solar parts maker sold by Genstar to Clearlake Capital Group.

Clark, Conte, Rutledge, Salewski and Weiss oversee a team of more than 40, roughly half of them investment professionals, according to TRSL documents. Genstar currently manages about $35 billion of assets.

The firm declined to provide a comment on this story.