Firm: Lehman Brothers
Fund: Lehman Brothers Co-Investment Fund
Initial target: $1 billion
Amount raised: $1.6 billion
Placement agent: none
Legal counsel: Pillsbury Winthrop Shaw Pittman LLC
Lehman began raising the fund with a goal of $1 billion, and it held a first close in June with $120.5 million that had a cap listed as $1 billion in documents filed with the Securities and Exchange Commission. Lehman Brothers and Lehman employees contributed $350 million to the co-investment fund.
The firm says that their LPs are a diverse group that includes endowments, financial institutions, insurance companies and pension funds and have a significant number of limited partners that invested in previous Lehman funds and attracted some new LPs as well. The
The fund targets minority investments between $5 million and $150 million in deals led by other private equity sponsors. The firm says it is diversified across deal size and has handled deals with under $200 million in enterprise value to multi-billion dollar enterprise value deals. While the firm began raising the fund in late January and early February this year, Lehman made three fund investments last year. It made two co-investment deals last fall and one in December of 2005. So far the fund has made 10 investments.
The fund has a four-year investment cycle but is currently seeing deal flow that will have it fully invested sooner. Managing Director David Stonberg says that while deal flow is very strong now, the fund’s investment period is flexible enough that it can weather any dry spells in the market. “We some breathing room to the extent that if the private equity market takes a breather of its own we can slow down,” says Stonberg. “We set up the investment period so we can remain as selective and disciplined like we are today.”
Stonberg says that the deal flow the firm is seeing and its opportunistic and agnostic philosophy on doing deals has led to it having a widely diverse portfolio of investments so far. He adds that because it is not taking the lead on investments, the co-investment fund could have a range of 25 to more than 40 portfolio companies. The fund has focused primarily on North America and Western Europe but has also reviewed investments in Asia and Latin America.
Lehman Brothers Co-Investment Partners became a co-investor in metal product provider Firth Rixson, buying a 36% share in the company from The
The fund also invested in
“What we’re seeing now is just relative to historical standards that there are assets that are now being approached by, considered by and taken private by private equity firms that before were not available to private equity funds before, either because of their ability to finance the large size of transactions, or because the credit markets couldn’t’ absorb them or there wasn’t sufficient equity capital,” says Stonberg. “With the fund sizes we’ve seen and pools of capital being raised, we’re seeing interest from enterprise value that was not avail to private equity before.”
Lehman is not alone in its enthusiasm for co-investment.