HGGC collected more than $1.1 billion for a fourth flagship mid-market offering, which the Silicon Valley private equity firm is already using to ratchet up its deal pace.
The amount raised, published in recently filed Form D fundraising documents, accounts for about 51 percent of HGGC Fund IV’s $2.25 billion target. If it reaches that final goal, the fund will be HGGC’s largest to date, exceeding by 22 percent the $1.84 billion secured in 2016 by Fund III.
Nineteen limited partners committed capital to Fund IV’s main vehicle and 32 to its sidecar, the Form Ds said. Disclosed investors include AP3, Broward Health Pension Fund and Fresno County Employees’ Retirement Association. Evercore is the placement agent.
Fund IV already made four platform investments, a person with knowledge of the matter told Buyouts.
The pool’s inaugural deal, announced in April 2020, was commercial brokerage PCF Insurance. HGGC acquired PCF to build on its existing track record of M&A activity in a highly fragmented sector, Buyouts sister title PE Hub reported. The company, which is also backed by BHMS Investments, not long afterwards closed four new add-on acquisitions.
Fund IV also led a $50 million growth investment in Aceable, a mobile-first education platform, and agreed to buy Specialist Risk Group, a specialty insurance broker, from Pollen Street Capital. In addition, it joined Bain Capital Tech Opportunities in an investment in Buildertrend, a construction management software provider. All three platform deals were announced last month.
Founded in 2007, HGGC is led by chairman and CEO Rich Lawson and president Steve Young, a former Pro Football Hall of Fame quarterback who played for the San Francisco 49ers. The firm reports completing over its history nearly 200 platform investments, add-ons, recaps and liquidity events with a total value of more than $27 billion.
HGGC’s strategy is to make control investments in North American mid-market companies in business services, consumer, financial services, healthcare, industrial services, information services and software sectors. The firm typically looks to invest $25 million to $200 million in opportunities with EBITDA of up to $100 million at closing, according to its ADV filings.
A key aspect of the strategy is its so-called “advantaged investing” approach. This helps HGGC source and buy scalable companies with strong positions in defensible niches through partnerships with owner-operators and sponsors who invest alongside the firm.
Along with dealmaking and fundraising, HGGC was active last year on the personnel front. lt announced six promotions, including the appointment of ex-Bain Capital principal Dan Stanko to partner, and 11 additions to the Palo Alto team.
Dyal Capital Partners, Neuberger Berman‘s GP stakes affiliate, holds a minority interest in HGGC. Dyal’s investment, announced in March 2019 in part to support GP commitments to new pools, was followed by the promotions to partner of Harv Barenz, John Block, Les Brown, Steven Leistner and Lance Taylor. Later the same year, HGGC launched Fund IV.
HGGC Fund III was generating a net multiple of 1.37x and a net IRR of 24.62 percent as of March 2020, according to data provided by Pennsylvania Public School Employees’ Retirement System.
HGGC declined to provide a comment on this story.
Action item: Check out HGGC’s ADV filings here.