New Mountain Capital reaps more than 65% IRR on SNL Financial sale

Target: SNL Financial

Price: $2.,23 bln

Buyer: McGraw Hill Financial

Seller: New Mountain Capital

McGraw Hill Financial Inc. said Monday, July 27 that it agreed to buy SNL Financial  for $2.23 billion. McGraw Hill is buying all of SNL Financial, including the stakes held by New Mountain and current and former members of SNL Financial management.

SNL Financial, of Charlottesville, Virginia, provides news, financial data and analysis for the following business sectors: financial services, real estate, energy, media & communications as well as metals & mining. McGraw Hill is backing its buy of SNL Financial with $1.7 billion in new debt and $525 million cash, Thomson Reuters Loan Pricing Corp said.

Once the sale closes, SNL Financial shareholders under New Mountain’s ownership will receive $1.75 billion in total gains, a source said. The transaction will have produced a more than 6x multiple of invested capital and an IRR of over 65 percent for New Mountain, the person said.

New York-based New Mountain, a generalist firm, typically invests $100 million to $500 million per deal. Portfolio companies include AmWINS Group Inc., EverBank, HealthPort and ZepInc. New Mountain’s investment in SNL Financial dates back to August 2011, when the PE firm closed its buy of a majority stake in the company. SNL Financial’s enterprise value at the time was $450 million. The deal included $175 million in debt, the source said.

New Mountain has already gotten some of its money back. In 2012, SNL Financial launched a $290 million dividend recap loan, LPC said at the time. The loan was used to pay out a $50 million dividend to SNL Financial’s equity holders, Moody’s Investors Service said in an October 2012 report. It’s unclear how much New Mountain received from the dividend. The firm, within 14 months of its SNL Financial investment, returned roughly half of its invested capital, including the 2012 dividend, the source said.

New Mountain used its third fund, which closed at $5.1 billion in 2008, to invest in SNL Financial. The firm has since raised its fourth private equity fund, which collected $4.13 billion in 2014.

Fund III is producing a net IRR of 8.4 percent and an investment multiple 1.3x as of Dec. 31, according to performance data from the California Public Employees’ Retirement System. New Mountain’s fourth fund, a very young pool, is generating a 3.5 percent IRR since inception as of Dec. 31, the Colorado Public Employees’ Retirement Association said.