Sun Capital Partners Inc., the Boca Raton, Fla.-based buyout shop focused on underperforming assets, finished raising its heftiest buyout fund to date. Sun Capital Partners IV LP, which hit its $1.5 billion hard cap, is three times the size of its $500 million predecessor fund, which until now was the firm’s largest.
Sun did not disclose any of Fund IV’s limited partners, but A. Richard Hurwitz, vice president of investor relations at the firm, told Buyouts that a “vast majority” of investors in this latest investment vehicle have already made commitments to at least one of Sun’s previous funds.
According to Buyouts, past investors in Sun funds include DuPont, Goldman Sachs, Notre Dame, PPM America, The Wilton Private Equity Fund, Yale University, M.I.T., University of Virginia, Duke University, Adams Street Partners, CMS, Common Fund, Wilshire Fund, Private Advisors, Quellos, The Ford Foundation and the Government of Singapore.
Sun tapped independent placement agent David Johnson to secure a tranche of new international investors, Hurwitz said. The firm did not enlist any help to secure new U.S.-based investors.
Fund IV was raised in about a month, which, according to Hurwitz, is the norm for the firm. After a six week pre-marketing period, the fund opened to commitments on March 25 and closed on April 28. The $500 million Sun Capital Fund III LP and the $300 million Sun Capital Securities Partners LP were both raised in similar timelines, Hurwitz said.
Sun’ first investment vehicle was a $28 million pledge fund, which eventually gave way to Sun Capital Partners II LP, a $200 million vehicle that closed in 2001.
One difference between Fund IV and its smaller ancestors is the amount of time that has been allotted to deploy its capital. Fund IV will have a four-year time horizon to make investments, whereas previous Sun Capital funds had two-year periods, Hurwitz said. He added that aside from the possibility of one or two outlying circumstances, Sun will continue its strategy of investing between $5 million and $25 million of equity in troubled companies earning revenues between $50 million and $2 billion. Sun Capital typically holds its investments for three to four years.
Though Hurwitz agrees that there may be credence to the theory that today’s high debt multiples will lead to tomorrow’s distressed opportunities, he said that line of thinking was not behind the firm’s decision to increase its investment capabilities three-fold. “We can only speak to our own experience, and that is that our deal flow has been consistent for the past three-and-a-half years… We average between 15 and 20 transactions a year and that’s what we will do with this fund.”
No investments with Fund IV equity have been made to date. As of press time, Sun Capital Fund III, is expected to be fully invested in less than 50 days, at which point the firm will begin hitting targets with Fund IV, Hurwitz said.
In other Sun news, the firm placed a $25 million growth capital investment in Musicland Group Inc., an entertainment retailer it acquired in June 2003. Musicland posted 2003 revenues of $1.4 billion.