Greenhill’s Fund Has Steep Rise

Greenhill Capital Partners, the private equity arm of New York investment bank Greenhill & Co. Inc., wrapped up fund-raising on its second investment vehicle with $875 million in commitments.

Greenhill Capital Partners II LP was on the market for about seven months with an original target of $700 million.

Compared to its last fund, the new vehicle represents a substantial hike in capital. Greenhill Capital Partners I LP was raised in 2000 and took in a $423 million from limited partners, which included the parent Greenhill as well as management at the firm. That fund made investments in 19 portfolio companies and, as of June 8, had $56 million of undrawn capital earmarked for follow-on investments.

About $88 million, or 10%, of fund II’s commitments came from Greenhill & Co. In addition, Greenhill’s managing directors and other professionals committed $136 million of their own capital. The remaining 74% of the fund hails from institutional investors, wealthy families and high-net-worth individuals. The firm declined to name any LPs specifically.

The firm plans to keep targeted the same sized companies with the new fund, even though it has a deeper pool of capital. But where previously the firm injected an average of $20 million of equity per Fund I investment, Fund II will deploy between $30 million and $35 million of equity per investment. This will allow Greenhill, which often invests with partners, to take the lead position more often, Niehaus said.

Greenhill has already put about $100 million of Fund II’s capital to work in four deals. The firm invested $80 million combined to acquire CLK Energy Partners LLC, Energy 51 Inc. and Genesis Gas & Oil LLC in three separate control-stake transactions that were all announced last month. The remaining $20 million was used for a follow-on investment for Global Signal Inc., a telecom infrastructure company Greenhill acquired in 2002.

“When we raised Fund I, the environment was frothier and more conducive to raising a first-time fund than it is today, since the barriers for entry were lower,” says Robert Niehaus, chairman of Greenhill. “Today is a more discerning fund-raising environment, but we had a more convincing story to tell, being that this was our second fund. As far as timing is concerned, I think we got lucky in both cases.”