JMI Equity To Seek $800M For 7th Fund

Tech-focused buyout and growth equity firm JMI Equity Partners is on track to raise an $800 million seventh fund during the second half of this year, Managing General Partner Paul Barber told PE Week, a sister publication of Buyouts.

The firm raised $600 million for its sixth fund, which closed in 2007.

Baltimore-based JMI invests between $10 million and $60 million in software, Internet, health care IT and business services companies, often preferring to be the first institutional investor in a company.

JMI frequently syndicates larger investments with buyout shops, such as Hellman & Friedman, and it also invites its limited partners to participate in investments.

The firm will not be looking to hire general partners or promote anyone with the new fund, Barber says. The firm’s general partners include Peter Arrowsmith, Chuck Dieveney (who also serves as CFO), Bob Smith and Brad Woloson. Barber and Harry Gruner are managing general partners.

“Same people, same strategy. We’ve all been together for a long time,” Barber says.

There may be promotions in the works for the other 25 JMI employees, Barber says. The firm employs a large number of junior investors who perform deal sourcing functions. “A handful of folks who have the opportunity to grow into partners based on performance,” he says.

Barber says that JMI has not had trouble fund-raising, despite the troubled economy. “It’s all about good numbers,” Barber says. “The firms that have good numbers can raise money the firms that don’t can’t.”

JMI’s sixth fund has not made distributions to limited partners, such as the California State Teachers’ Retirement System (CalSTRS), as of March 2009, the most recent date for which public data is available.

The firm’s fifth fund, a $300 million vehicle raised in 2005, had disbursed $16.2 million to CalSTRS, of the $27.6 million it had called down of the system’s $30 million commitment. CalSTRS reports the IRR on the fund at 13.9 percent, as of March 2009.

JMI IV, a $226 million fund raised in 1999, had returned 1.2x, for a 3.5 percent IRR, according to data from the California Public Employees’ Retirement System (CalPERS).

Other limited partners that have invested in previous JMI funds include the Alaska Permanent Fund Corp., the Employees’ Retirement System of the State of Hawaii, the Fire and Police Pension Association of Colorado, the Illinois Municipal Retirement Fund and the Pennsylvania State Employees’ Retirement System, records show.

The firm has had a number of recent exits.

It co-invested with Goldman Sachs, Northzone Ventures and Sequel Venture Partners to put $22.4 million into network software company Nimsoft, which sold to CA for $350 million in March. It invested with Lazard Technology Partners, RBC Dominion Securities Corp. and others to put $20.8 million into digital security company Intellitactics, which sold to Trustwave in March.

Last year, it sold server configuration company Configuresoft to EMC for an undisclosed amount and data software company Applimation to Informatica for $40 million, records show.

It’s most memorable recent deal was its investment alongside Hellman & Friedman in the $1.2 billion acquisition of DoubleClick in July 2005. It then sold the Internet advertising company to Google in April 2007 for $3.1 billion.