New Funds: Bain Capital Fund VII Aims for $2B –

With tight lips, Bain Capital this month began marketing its seventh buyout fund. Bain Capital Fund VII LP, like Fund VI, will be raised simultaneously with a Coinvestment Fund.

Information from a source close to the fund confirmed a $2 billion target for Fund VII and a $1 billion target for the Coinvestment Fund. The fund, like previous Bain Capital Funds, will make strategic investments in consumer products, telecommunications, New Economy, health care, retail and distribution, and basic industry companies.

The managing partners of the fund will commit more than $150 million to the fund, according to information provided by the source.

Bain Capital will seek investments in and acquisitions of companies with strong management teams, excellent prospects for added value, and the possibility of management participation through stock ownership, according to the source. Deal size will range from $5 million to $500 million.

Reports have indicated that Bain Capital will again charge a 30% carry for Fund VII, as it did for Fund VI. The carry for the Coinvestment Fund will reportedly be 20%, as was the case with Fund VI. Officials at Bain declined comment on this or any other aspect of the vehicle. Indications are that this fund will not differ from previous funds.

Bain Capital’s Fund VI closed in 1998 with $1.1 billion in committed capital and the Coinvestment Fund of Fund VI raised $400 million. Bain’s general partners committed $200 million to the final closing. Also in 1998, Bain Capital Pacific Fund I raised $300 million for investments in Australia, New Zealand and the Pacific Rim.

Bain Capital will continue its tradition of investing in high-cap companies in various industries. The firm’s recent investments include Interpath, an e-commerce unit of Carolina Power & Light, Mattress Discounters, ChipPac Inc., a semiconductor assembly and test provider, and Stream International Inc., a technical support provider.

The launch of Fund VII is the first since Bain Capital lost several key members of its management team to other firms, such as former managing directors Geoffrey Rehnert and Marc Wolpow, who founded the Audax Group last July, former principal Paul Spinale, who joined the Audax Group shortly thereafter, and former managing director David Dominik, who reportedly resigned in March to launch his own venture capital firm.

With the final close of Fund VII, Bain Capital will have more than $10 billion under management. Based in Boston, the firm has committed over $18 billion in financing across 200 initial and add-on investments. Bain’s investment returns rank within the top 10% of similar firms, according to the firm’s Website.