Greenhill Capital Delays Fund III Launch

Executives at Greenhill & Co.’s investment arm have decided to put off raising their next mid-market buyout fund, and probably won’t launch it until the first quarter of 2010, a source familiar with the plans told Buyouts.

Executives at the firm, Greenhill Capital Partners, had originally planned to start raising the fund in January 2009, as previously reported in Buyouts. Our source said that like many other buyout firms, its executives have been concentrating on managing their portfolio through a challenging economic environment.

The target for the fund is still expected to be $1 billion to $1.25 billion, our source said. Greenhill & Co.’s in-house fund placement advisory group—the core of which came from the former fund placement group at Lehman Brothers—will help it raise the fund.

Greenhill Capital is one of many firms of all sizes and strategies—including Kohlberg Kravis Roberts & Co., Highland Capital Partners and CapitalSouth Partners—whose executives have decided to delay soliciting fresh capital in the most difficult fundraising market in recent memory. Other firms, such as GI Partners and Imperial Capital, have trimmed targets, while still others, such as TA Associates, cut their carried interest rate to attract more interest from limited partners.

The investment arm of the publicly traded New York company invests in specialty finance, telecommunications, insurance, reinsurance, business services and energy. It typically writes equity checks of $10 million to $100 million per transaction, but will sometimes invest more. Target companies usually have enterprise values between $50 million and $1 billion, revenues of at least $50 million, operating income of at least $10 million and cash flows of at least $15 million.

Portfolio companies include Stroz Friedberg LLC, a New York-based Internet technology consulting and services firm in which Greenhill Capital invested $30 million in January 2007; and BreitBurn Energy Company LLC, a Los Angeles-based oil and gas exploration and development company that Greenhill Capital bought last month for $305 million.

The firm, founded in 2000, manages $1.3 billion. It raised its most recent fund, the $875 million Greenhill Capital Partners II LP, in 2005. Managing directors and other employees have invested $200 million in the firm’s funds.