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Madison Dearborn Partners close to wrapping up $4.5bn Fund VIII

If Madison Dearborn Capital Partners VIII meets its target, it will be the second-largest fund raised in the Chicago PE firm's nearly three-decade history.

Madison Dearborn Partners is fast approaching the final close of an eighth flagship offering, launched for marketing late last year.

The Chicago firm last week filed Form D fundraising documents showing it secured almost $4.1 billion for Madison Dearborn Capital Partners VIII and parallel pools. The flagship is within striking distance of its $4.5 billion target, reported by Buyouts last October.

If it meets the goal, the fund will be the second-largest in MDP’s nearly three-decade history. The largest, Fund V, collected $6.5 billion in 2006. Fund VIII’s predecessor brought in $4.4 billion in 2016.

Fund VIII is backed by several US pension systems, among them California Public Employees’ Retirement System, which invested $400 million. CalPERS is returning after having skipped MDP’s two prior funds, PEI data showed.

Other disclosed limited partners are Maryland State Retirement and Pension System, which committed $150 million; Minnesota State Board of Investment and Virginia Retirement System, each of which supplied $100 million; and Washington State Investment Board, which committed $250 million.

Staying the course

MDP’s latest flagship vehicle will maintain the strategy followed by Funds VI and VII, a person with knowledge of the matter previously told Buyouts.

Fund VIII will make control and minority investments in mid-market and upper mid-market companies in North America, in part by working MDP’s robust Midwestern deal pipeline. It will target opportunities in basic industries, business and government software and services, financial and transaction services, healthcare, and telecom, media and technology services.

A sixth sector, consumer, a long-time specialty of MDP, was dropped three years ago.

Roughly 70 percent of the capital in MDP’s first seven funds was deployed to buyouts, with the balance going to growth equity activity. That split is likely to continue in Fund VIII, the source said. It is expected to back up to 20 platform companies.

MDP has been quite active on the deal front this year. The firm agreed to acquire listed health insurance tech provider Benefytt for about $410 million, according to Pitchbook. MDP and Thoma Bravo also agreed to invest in the spin out of Kaufman Hall’s enterprise performance management software unit, now called Syntellis.

It is not known if Fund VIII participated in these or other recent deals. MDP declined to comment.

MDP is led by chairman John Canning and co-CEOs Paul Finnegan and Samuel Mencoff, who are among its founders. The senior team includes a dozen managing directors responsible for sector-specific investing.

Madison Dearborn Capital Partners VII generated a net IRR of 9.96 percent as of March, a report by MSBI showed. Fund VI was earning a net IRR of 23.73 percent as of December, according to a report by WSIB.

Action item: Check out Madison Dearborn Partners’ ADV filings here.