New Mountain hits stingy markets with next flagship

New Mountain Capital is back in fairly quick time with its next flagship fund, targeting $12 billion, sources told Buyouts.

The firm is among a handful of larger managers seeking capital in the stubbornly sluggish fundraising market this year. Limited partners have generally pulled back on their commitment pacing as they contend with the dual impacts of the denominator effect and dwindling cash flows from their portfolios as exits slow.

That’s not to say that LPs are out of the market; many are simply choosing to commit to their deepest relationships. Those managers, usually the well-established shops that have navigated through cycles, are the main focus of LP money right now.

New Mountain has this type of reputation. The firm has steadily generated a net total value to paid-in multiple of 2x and above as of September 30, 2022, according to an investment memo for the Nebraska Investment Council.

Its most recent Fund VI, which closed in 2021 on $9.6 billion and is still in its J-curve period, was producing a 1.1x net TVPI, according to the memo. Fund VI closed on $9 billion, with $600 million of GP commitment, the firm said.

Fund VI closed along with $640 million for New Mountain’s first non-control fund called Strategic Equity Fund I, the firm said in a statement at the time. The $12 billion target is solely for Fund VII, one of the sources said. It’s not clear if the firm is also raising the next non-control vehicle.

Fund VII is charging a 1.75 percent management fee on committed capital during the investment period, and then 1 percent on invested capital after, according to documents from the Nebraska Investment Council. Fund VII has a 20 percent carried interest rate and an 8 percent preferred return, the documents said.

Steve Klinsky formed New Mountain in 1999 along with Robert Grunsky and David Wargo, the documents said. The firm managed nearly $37 billion, according to its website. It invests in “defensive growth niches” in healthcare, software, business services, information and data, logistics, specialty chemicals, federal services, financial services and environmental services.

Klinsky is an owner of the management company, along with Blackstone Group, which bought a minority stake in 2018, and a group of the firm’s managing directors, the memo said. All New Mountain team members share in the economics through carried interest and/or other proceeds in each of the firm’s deals, according to the Form ADV.

The firm has 210 employees across three offices in New York, San Francisco and London, with 125 on the investment side, the memo said.

New Mountain is in the market with several other big managers, including Carlyle Group, Apollo Group, Hellman & Friedman, TA Associates, and Vista Equity. KKR is expected to bring its next North American flagship pool to market later this year.