Sycamore Partners loses one of its founding partners as it eyes next flagship

The move could have an impact on the firm’s efforts to raise its next flagship fund, which was expected to start next year.

Sycamore Partners, a retail specialist that raised its last fund in 2018, lost one of its two founding partners, Peter Morrow, who left the firm earlier this year, sources told Buyouts.

The move could have an impact on the firm’s efforts to raise its next flagship fund, which was expected to start next year, sources told Buyouts. It’s not clear if Morrow’s departure has changed that timetable. Limited partners like to see a stable team and especially leadership in firms they agree to back for a decade or more.

Sycamore in 2019 hired Rob Sweeney, former global head of consumer and retail investment banking at Goldman Sachs, as president. In January the firm also brought on managing director Patrick Kennedy, who joined from H/2 Capital Partners, according to his LinkedIn profile.

Other managing directors include Paul Fossati, who leads capital markets, and joined in 2015 from Morgan Stanley.

Sycamore was formed in 2011 by Stefan Kaluzny and Morrow, both former executives at Golden Gate Capital, to invest in consumer and retail businesses in North America. The firm has had a focus on underperforming companies facing distress, according to an investment memo from the New Jersey Division of Investment, which backed the firm’s third fund.

It’s not clear why Morrow left the firm. A Sycamore spokesperson declined to comment. Sources said Morrow plans to start his own shop. He didn’t respond to a LinkedIn connection request.

It’s also not clear if Morrow’s departure triggered a key-person event in Fund III, which the firm said closed in 2018 on $4.75 billion. When a key-person event is triggered, generally a fund either automatically, or by LP approval, loses its ability to make new investments. LPs can then approve allowing the firm to make new investments, usually after a new leadership slate is approved. Many firms preempt the actual triggering of a key-person provision by pre-negotiating with LPs.

The New Jersey Division of Investment memo named key executives at Sycamore as Kaluzny, Morrow, Fossati, as well as managing directors Ryan McClendon, who joined around inception in 2011, and Emmelyn O’Meara, who joined the firm in 2016.

Fund III was generating a 1.21x total value multiple as of March 31, according to performance information from the New Jersey Division of Investment. As of that date, the fund showed no distributions, according to New Jersey information.

The firm raised $1 billion for its debut fund in 2011 and closed Fund II on $2.5 billion in 2014. As of December 31, the firm managed about $11.2 billion, according to its Form ADV.

Past Sycamore investments include the $2.2 billion take-private of Jones Group in 2014 and the 2017 buyout of Staples, which valued the company at $6.9 billion. It’s also invested in Hot Topic Inc, Talbots Inc and family-owned department store company Belk.

Belk filed for Chapter 11 protection from creditors in 2021 and engaged in a restructuring agreement with Sycamore in which the firm retained majority control. The restructuring reduced debt by about $450 million, and included about $225 million in new capital from Sycamore, KKR, Blackstone Credit and some existing first-lien lenders, according to a statement at the time.