LLR Partners targets $2.25bn for latest flagship fund

LLR Equity Partners VII will focus on lower-mid-market tech and healthcare companies.

LLR Partners is targeting $2.25 billion for its seventh flagship fund.

The fund is focused on subsectors within tech and healthcare, and that specialization could help set the firm apart in the tougher fundraising environment. Many LPs are struggling with overexposure to the asset class, along with slowing distributions, which is causing them to mostly focus on their established relationships.

Information about LLR Equity Partners VII was included in documents prepared by adviser Franklin Park for the Arkansas Teacher Retirement System board meeting held on February 6. Buyouts reviewed the documents. The system committed $30 million to the fund.

According to the presentation, LLR looks for profitable lower-mid-market companies or businesses that show a path to profitability within two years. Potential companies for LLR will have revenues between $10 million and $100 million with enterprise values less than $200 million, double-digit revenue growth backed by recurring revenue and led by management teams looking to raise their first institutional capital, according to the presentation.

Specifically, LLR will eye software, industrial technology, fintech, HR technology, healthcare IT, managed care and educational technology firms, in addition to healthcare providers, the presentation said.

LLR has a 20-person “value creation team” that works with portfolio companies, according to the presentation. The team focuses on finance and operations, human capital, sales and marketing, strategic planning, product management and M&A.

According to the presentation, LLR’s 80 realized deals have returned 3.1x their initial investment, resulting in a 27 percent gross IRR. LLR’s first, second, third and fourth funds all rank in the first and second quartiles compared with other buyout funds in those vintage years.

However, the second fund had a 46 percent loss ratio, according to the presentation. Franklin Park says five of the six losses or markdowns in Fund II’s portfolio were through investments in industrial, consumer discretionary and financial sectors.

Since then, LLR has shifted its focus only to technology and healthcare, according to the presentation.

“Further, based on lessons learned from prior losses, the GP’s strategy has evolved to prioritize companies with double-digit revenue growth, meaningful recurring revenue and competitive differentiation,” Franklin Park said in its presentation.

LRR’s fifth and sixth funds also rank in the third and fourth quartiles for their vintage year, according to the presentation. Fund VI closed on $1.8 billion in 2020.

But Franklin Park notes that the fifth fund has produced over a 22 percent net IRR and that LRR has held 13 of the 21 investments in its sixth fund for less than a year.

LLR recently said it invested in Viventium, a provider of human capital management software products that assist health services companies in payroll and HR, employee onboarding, benefits administration and ACA compliance, according to a press release issued February 7.

One example of LLR’s past successes came via a $26.5 million investment in digital transaction management company eOriginal in 2016. In 2020, eOriginal was sold to Netherlands-based software and solutions provider Wolters Kluwer for over €231 million, according to a press release.

According to the presentation, LLR was created in 1999 by Ira Lubert, Seth Lehr and Howard Ross. LLR is part of the Independence Capital Partners fund family, according to its website.