Leonard Green to target up to $2 bln for debut small-cap fund

Leonard Green & Partners is targeting up to $2 billion for its debut small-cap fund, which it will raise alongside its core fund, sources with knowledge of the process told Buyouts.

The firm is expected to launch its next flagship in early 2019, Buyouts exclusively reported in September. The small-cap debut will launch alongside the main fund. It is expected to involve Evan Hershberg, who is joining Leonard Green in 2019 from Oncap, the middle-market investment group of Onex.

At $2 billion, the fund will be more likely a middle-market-focused vehicle, an LP with knowledge of the fund.

“That is the kind of trend we’ve been seeing across many different managers — grow the main fund above the size they had targeted originally and just start a smaller fund,” the LP said. 

For Fund VIII Leonard Green is expected to target at least $10 billion and even as much as $12 billion, the LP told Buyouts. Leonard Green Fund VII closed on $9.6 billion in 2016 and could have raised more based on demand, sources said at the time.

Erika Spitzer, head of marketing and investor relations at Leonard Green, declined comment.

Leonard Green was formed in 1989 and is focused primarily on service industries in consumer, business and healthcare, and retail.

Green Equity Investors VII hit its hard cap of $9.1 billion plus a GP commitment of $500 million in 2016, Buyouts has reported. That fund was more than 50 percent larger than Fund VI, which closed on $6.25 billion in 2012.

Fund VII, still early in its J-curve period, was generating a 0.9x total value multiple as of Dec. 31, 2017, performance information from Washington State Investment Board showed.

Fund VI was producing a 14.7 percent net internal rate of return and a 1.52x multiple as of March 31, 2018, Oregon Public Employees Retirement Fund data showed.

Hershberg was a managing director at Oncap. He left earlier this year, Buyouts previously reported.

Hershberg was working on the same kind of platform at Oncap, creating Oncap Growth, a small-cap platform. In light of Hershberg’s departure, Oncap put the small-cap platform on hold, the firm said in an LP note seen by Buyouts.

Leonard Green is led by a large group of partners, including Managing Partners John Danhakl and Jonathan Sokoloff, Senior Partners John Baumer and Jonathan Seiffer and Partners Usama Cortas, Timothy Flynn, Kristofer Galashan, Christian McCollum, Michael Solomon and Alyse Wagner, the firm’s Form ADV said.

As of Dec. 31, 2017, Leonard Green managed about $23 billion, the filing said.

Action Item: Check out Leonard Green’s Form ADV here: https://bit.ly/2LPGK4X

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