New Funds: Behrman Capital Enters Big Leagues –

San Francisco and New York-based Behrman Capital this month began pre-marketing for its third buyout fund, Behrman Capital III LP, which sports a target of $1 billion, said a limited partner source.

With the new fund, Behrman Capital will join the likes of Silver Lake Partners LLC, Kohlberg Kravis Roberts & Co., Hicks Muse Tate & Furst Inc., Texas Pacific Group, The Blackstone Group, The Carlyle Group, and Clayton Dubilier & Rice in the league of firms with mega-funds.

Darryl Behrman, a managing partner at Behrman Capital, could not be reached for comment.

Behrman Capital’s previous fund, Behrman Capital II LP, closed on $518 million in January, 1998 (BUYOUTS February 9, 1998, p. 3). Some of the investors in that vehicle include Pfizer Retirement Annuity Plan, Mead Corp., UNISYS Master Trust, BankAmerica Capital Corp., Chase Capital Partners, NationsBank Corp., SBC Warburg Dillon Read and The National Geographic Society.

From Telecom to Greeting Cards

One of Behrman Capital’s existing investors includes the Kansas Public Employees Retirement System (KaPERS). “My intention is to continue to invest with the group as long as their performance is what I expect it to be, and they stay consistent with their strategy,” said Janet Kruzel, alternative investment officer at KaPERS. “We invested $20 million in their existing fund and I would imagine a commitment to the new fund wouldn’t be less than that.”

Kruzel said that she is concerned at the way buyout funds keep growing larger and larger, fearing there isn’t enough resources and deal flow to put all the capital to work. “If they don’t change their quality limits, then I’m not concerned about how much they’re raising,” Kruzel said. She also said limited partners want to see firms investing committed capital before beginning the marketing of another vehicle in a year or so.

Brad Pacheco, a spokesman for the California Public Employees Retirement System (CalPERS), said the system will be investing $150 million into Behrman Capital’s new fund.

Behrman Capital has invested across a broad range of industries, from telecommunications to health care to greeting cards. In November 1999 ACS Communications Inc., which is majority-owned by Behrman Capital and provides fiber optic cables within businesses, bought ICG Fiber Optic Technologies, a regional provider of structured cabling infrastructures (BUYOUTS January, 10, p. 37). Behrman Capital in September 1999 acquired corporate marketing company, Executive Greetings, for $273 million and also registered portfolio company The Management Network Group Inc. for an IPO. Management Network provides consulting services to the telecommunication industry.

Other acquisitions include the $70 million buyout of Brooks Equipment Co., a manufacturing company offering outsourcing logistics for the first-response fire industry, in December 1998 (BUYOUTS Jan. 25, 1999, p 11), and an undisclosed majority stake purchased in Tandem Health Care in April 1998 (BUYOUTS Dec. 21, 1998, p. 15). In November 1996, the firm landed its first platform in the information technology sector by acquiring a majority stake in Condor Systems, a defense electronics contractor, in a $117 million leveraged recapitalization (BUYOUTS Dec. 23, 1996, p. 8).

Behrman Capital was founded in 1992.