Onex hits the pause button on flagship buyout fundraising

Onex, which last year rolled out a sixth flagship buyout offering, elected to delay further capital raising until market conditions get better.

“We have made the tough but strategic decision to pause fundraising for Onex Partners VI,” CEO Bobby Le Blanc said in a first-quarter earnings call. “This will allow us,” he said, “to focus on generating strong operating company value and realizations” within Onex Partners V and the portfolio “until we resume fundraising.”

The firm intends to continue investing, “leveraging the remaining capital in OPV, co-investment opportunities with LPs and Onex’s balance sheet,” he added.

Last November, Fund VI raised $2 billion in a first close, $1.5 billion of which came from Onex itself. A second closing was expected early this year. No target for the vehicle has been disclosed, though Unquote reported the goal is about $8 billion, citing senior managing director Nigel Wright as the source.

Fund V was wrapped up in 2017, securing $7.15 billion, ahead of a $6.5 billion target.

Slower fundraising since 2022, caused mostly by overstretched LPs, has upset the plans of many private equity GPs, compelling them to lengthen timelines and rethink target sizes. Onex acknowledged these tough circumstances in its Q1-2023 interim report, saying conditions must improve before it returns to the market.

Another variable in the decision appears to be a desire on the part of LPs for increased realizations. While Onex continues to have the support of long-standing fund investors, Le Blanc said, “they want to see more return of capital.”

“Many institutional investors are overallocated and their inflows and outflows are out of whack versus the norm,” he said. “For us, they want to see the IRRs that we’re telling them we’re earning in OPV to be a bit more tangible before they commit.”

Onex believes it has the resources to wait out a challenged fundraising environment. One of the listed shop’s greatest assets, Le Blanc said, is a large balance sheet: “The beauty of an $8 billion balance sheet with no liability is we do have flexibility. There is nothing that is forcing us to come back to market on any given day.”

The pause in Fund VI’s capital raising does not impact the progress of other private equity and private credit offerings. In fact, Onex’s latest mid-market fund, ONCAP V, held a second close in April, bringing committed capital to $520 million or just over a third of its $1.5 billion target. Onex invested $250 million.

The earnings call was the first for Le Blanc as CEO. He was appointed to the job this month at Onex’s 2023 annual meeting of shareholders, taking over from founder Gerry Schwartz. Schwartz remains with the firm as chairman.

Le Blanc joined Onex in 1999 from Berkshire Hathaway and has occupied the role of president since 2020.

(This story was updated to clarify the source of Onex Partners VI’s reported target.)