Numerous first-time buyout funds emerge

Despite the difficulties facing first-time private equity funds in a recession, plenty of them are pushing ahead with their fund-raising efforts.

At least three first-time funds—TZP Group, Yukon Partners and a team led by former Aldus Equity executives—have come to light within the last week. And over the last six months, PE Week has tracked dozens of other emerging managers with no existing track record that are raising new funds.

Some, such as Huntsman Gay Capital Partners, have already reach their fund targets.

Among the newcomers is a New York-based firm led by three former executives from Dallas-based private equity firm Aldus Equity. The name of the new firm is unknown, but the PE pros are planning on starting a new private equity firm focused on investing alongside emerging managers, says a source familiar with their plans.

The team, led by former Aldus Partner Marcellus Taylor, is hoping to attract investors who may see it as a better bet than putting money in mega-buyout funds, as the private equity industry adapts to life without significant leverage.

The target launch for the Dallas-based company will be sometime late in the first quarter, the source says.

Taylor left Aldus earlier this year and two of his former colleagues, Kevin Sample and Wayne Greene, are joining him in starting the firm, the source said.

Another firm angling to raise its debut fund is TZP Group, a lower middle-market PE shop focused on business and consumer services companies.

The New York-based firm recently made its first investment, a $20 million investment in avVenta Worldwide, a digital production and interactive services business. A source says that TZP has held at least two closes on its fund toward an undisclosed target. The anchor investor is a large university endowment. The firm’s partners declined to comment on its fund-raising activity.

TZP, which is named after a biblical reference, markets a non-traditional track record, since many of its partner’s most recent experience is in the corporate world. The firm is run by Managing Partner Samuel Katz, who previously was the CEO of Travelport Ltd. Katz had also previously worked at Cendant Internet Group, Drexel Burnham Lambert and The Blackstone Group.

Katz says that the firm’s appeal to potential LPs has been its “partner of choice” strategy of working with entrepreneurs to build companies in a dramatic fashion.

Another new firm is Yukon Partners, a new mezzanine fund that’s seeking $300 million for its debut fund, according to a source familiar with the situation.

The Minneapolis-based firm is run by former Norwest Mezzanine Partners pros Michael Hall and William Dietz.

The firm wouldn’t comment on its fund-raising. Hall, who was general partner at Norwest, and Dietz, a former partner, left Norwest early last year.

Among the other new firms in the market are, according to PE Week:

• West Hill Partners, which is seeking $500 million;

• Dominus Capital, which has already raised $375 million toward a $500 million hard cap;

• Riverwood Capital, which makes growth equity tech investments, and is seeking to raise $750 million (see story, page 4);

• Navitas Capital, is looking to raise between $35 million and $50 million;

• Bacchus Capital Management, which has an unknown fund target;

• Elysian Capital, a London-based consumer-oriented buyout firm, which is seeking $340 million;

• Blue Horizon Equity in San Francisco, which is raising $150 million;

• Guardian Capital Partners, based in Wayne, Pa., which has raised $37 million towards its $80 million inaugural fund;

• and Solamere Capital, a Boston-based buyout firm, which is raising $200 million.

The new firms can take solace in Huntsman Gay Capital Partners, which was expected to reach its hard cap of $1.25 billion at the end of last month, according to a source familiar with the situation.

The Palo Alto, Calif.-based firm, formed by industrialist Jon Huntsman and former Bain Capital investor Bob Gay, did not return calls for comment.

The firm raised $1.25 billion, thanks to anchor commitments from limited partners California Public Employees’ Retirement System, California State Teachers’ Retirement System, AlpInvest, C.V. Starr & Co. and GIC, says the source. CalSTRS committed $100 million, while CalPERS committed $180 million, according to public documents.

“The fund will for sure be oversubscribed,” says the source, crediting the popularity in dire fund-raising times to the prior success of the investors Huntsman and Gay.

The firm’s roster includes the likes of former San Francisco 49ers quarterback Steve Young, former Key Venture Partners Managing Director David Dame, former Bain Managing Director Gregory Benson and Ron Mika of Sorenson Capital.

Megan Davies from Reuters contributed to this report.