Hellman & Friedman signals potential launch of next flagship later this year

GPs, especially the strongest performers and those investing in today’s popular strategies like enterprise software, are coming back to market quicker than ever.

There’s an anecdote going around the private equity market these days: for every $1 of capital limited partners have to commit, they have $3 to $4 of re-ups from their existing GP relationships.

GPs, especially the strongest performers and those investing in today’s popular strategies like enterprise software, are coming back to market quicker than ever. They’re raising larger funds and new products – taking most of the LP attention.

Case in point: San Francisco’s Hellman & Friedman, which closed its tenth flagship fund on $24.4 billion in July. The firm is in the preliminary stages of talks with certain LPs about launching its next flagship pool later this year, with an eye toward holding a close in the first quarter of 2023, three sources told Buyouts.

Because discussions are early, that timeline could change. One factor involved in the firm’s decision to launch is whether LPs have already maxed out their allocations for 2022. It would be advantageous to get on LPs’ 2023 calendars in that case, sources said.

Hellman & Friedman has not talked about a potential target, the sources said. Fund X closed on $24.4 billion in July. That fund is approaching 60 percent deployed and/or reserved, which puts the firm on track to launch a new fund later this year, according to one of the sources, an LP with knowledge of the firm.

A spokesperson for Hellman & Friedman declined to comment.

H&F launched Fund X in early 2021 and had raised most of its $20 billion goal from existing investors. The tally included a minimum of $1.25 billion as a GP commitment from the firm, Buyouts previously reported.

H&F focuses on large buyouts in North America and Europe, according to the MassPRIM documents. Its target sectors include software, financial services, business and information services, healthcare, internet and media, energy and industrials and retail and consumer.

Hellman’s strong fundraising comes from the top-of-the-line performance of its funds. The firm’s eighth fund, which closed on $10.9 billion in 2014, was generating a 25.4 percent net internal rate of return and a 2x multiple as of June 30, according to performance information from California Public Employees’ Retirement System.

Its seventh fund, which closed on $8.8 billion in 2009, was producing a 25 percent net IRR and a 3.3x multiple as of the same date, according to CalPERS data.

The market this year is jam-packed with big, in-demand shops like Thoma Bravo, Silver Lake, Blackstone Group, TPG (which is expected back soon) and Vista Equity, among others. And these are just the top of the market. The mid-market is even more crowded.

Last year, 854 buyout, growth equity, venture capital and other PE vehicles raised about $475 billion, up 19 percent from the $399 billion raised in 2020, according to Buyouts’ research.