Leonard Green & Partners is just weeks away from holding a final close on its oversubscribed fourth fund, according to sources familiar with the process. The new vehicle was launched earlier this year with a $1.5 billion target, but an excess of limited partner interest will likely push the final tally upwards of $1.8 billion.
The final drive to conclude fund-raising comes just as the Los Angeles-based firm is trying to cope with the loss of company founder Leonard Green, 68, who died late last month while on vacation in Italy (See story). Green’s passing, while tragic, is not expected to hinder the fund closing since he was niether listed as an active investor in the placement memorandum, nor was he entitled to any of its profits.
“This is an example of a firm that was able to successfully undergo a generational transition, although no one expected the tragedy of Leonard Green dying so soon,” says Erik Hirsch, chief investment officer of Hamilton Lane Advisors, an LP in Green Equity Investors IV. “They successfully maneuvered from being the Leonard Green group to becoming Leonard Green & Partners, so that the whole firm’s success wasn’t dependent on a single individual.”
Perhaps more important to the firm’s fund-raising success has been its ability to produce positive returns in a down market. According to the fund data recently released by the University of Texas Investment Management Co. (UTIMCO), the $1.24 billion Green Equity Investors III has already returned nearly 25 cents on each dollar drawn down since the fund was closed in 1999. Moreover, UTIMCO reports that the fund has an internal rate of return (IRR) of 20.4%, which far surpasses the pooled vintage year average benchmark of -6.5%, according to Venture Economics (publisher of PE Week).
“Not only has their ability to exit been unparalleled, but they’ve been able to take capital off the table on IPOs [like PETCO Animal Supplies Inc. and VCA Antech Inc.] by returning full cost to LPs while continuing to hold significant public positions,” Hirsch says.
The lead investor on Fund IV is the California Public Employees’ Retirement System (CalPERS), which had previously been the sole LP on a $50 million side fund to Green Equity Investors III. Other known investors in Fund IV include Hamilton Lane and the Florida State Board of Administration.
The new fund has yet to make a new investment, as Leonard Green & Partners is still hard at work on fully committing its predecessor fund. To that end, the firm recently closed on a leveraged recapitalization of Phoenix Scientific Inc.
Contact Dan Primack