GI Partners Closes $1.45B Second Fund

Firm: GI Partners

Fund: GI Partners Fund II

Target: $1 billion

Amount Raised: $1.45 billion

Placement Agent: Lazard

Legal Counsel: Gibson Dunn & Crutcher

In an era where more and more domestic firms are increasing allocations to foreign investments, one group that was international from the get-go has not surprisingly found success in raising its sophomore fund. GI Partners held a final close on its second fund, GI Partners Fund II, with $1.45 billion.

GI Partners invests in asset-based businesses in the U.S. and Western Europe and usually makes equity investments between $25 million and $250 million. The firm pursues management buyouts, platform investments, turnaround situations and direct assets or asset portfolio purchases. Its sectors of interest include healthcare services, retail, hospitality and leisure, logistics, media and entertainment, financial services, technology and real estate.

The firm, which is based in London and Menlo Park, Calif., expects that the investments in its new fund will fall more evenly between the United States and Western Europe. Its first fund, Global Innovation Partners, closed in 2001 with $526 million and allocated approximately 65% of its capital to the U.S. and about 35% to Europe. According to the California Public Employees’ Retirement System (CalPERS), GI Partners’ first fund has an IRR of 29.4% and a return multiple of 1.6 times.

“We see very strong deal flow coming out of Europe, which leads us to believe we’ll have a more balanced allocation between the U.S. and Europe in this fund,” said Executive Managing Director Rick Magnuson. He noted that the firm increased the size of its investment staff in Europe and the staff is more evenly balanced between the two continents.

A key to GI’s strategy is that the firm focuses on asset-based businesses and properties. It is finding that Europe is fertile ground for this approach. “For our strategy, there are quite a few middle-market businesses that are asset-intensive [in Europe], so Europe is a target–rich environment for us,” noted Magnuson.

For the new fund, GI Partners assembled a more international base of limited partners. Fund II has a total of about 12 institutional investors backing the vehicle, including the California State Teachers’ Retirement System (CalSTRS); the Oregon Investment Council, which invested $100 million, and CalPERS. Overseas limited partners joining GI for the first time reportedly include Scandinavian pension ATP and the Abu Dhabi Investment Authority.

The firm started marketing the fund last year, and held a first closing last October. It initially set a target of $1 billion but increased its goals and moved its fund cap twice to accompany investor demand. The fund has already committed 40% of its capital, including the recent $1.05 billion purchase of 290 pubs from U.K.-based pub operator Punch Taverns. —M.S.