Vestar wraps up fund V with $3.7B

Vestar Capital has closed its largest fund to date, having raised $3.7 billion, the firm announced last month.

Vestar Managing Director and fund-raising co-leader David Hooper says the oversubscribed fund perhaps could have closed earlier if not for the frenetic fund-raising activity in 2005, which caused several LPs to spend more time reviewing other opportunities, processing paperwork and getting approvals.

He says that from the LP side, “There is significantly more potential for new investors interested in private equity [now] than in 1999.” But this didn’t affect Vestar’s capital raising process, which included 90% return LPs and some new investors from Europe.

Vestar’s 1999 fund was also a quick process. “I think part of the reason for the speed was that we had a similar story to tell [this time],” Hooper says.

Although this fund is substantially larger than its last fund, which had $2.5 billion in capital commitments, Hooper says the only new news from Vestar’s point of view was its expansion into Europe.

Since 1999, Vestar has opened offices in Paris and Milan, which were intended to help find acquisition opportunities for Vestar’s domestic portfolio to expand abroad. With some new European investors in the fund providing connections, Hooper says that Vestar is in an even better spot now to find such targets.

The firm has 20 partners spread between its offices in New York, Denver, Boston, Paris and Milan.

Fund IV was fully invested last year, and Vestar announced its first purchase out of Fund V in December when it bought Nybron Flooring International, which Vestar calls the European leader in wood flooring products.

Fund V will stay within Vestar’s traditional investment parameters: consumer, industrial, media and communications, financial services and health care. Vestar looks for transactions worth between $100 million and $3 billion and can invest up to $750 million in any one target.

In funds IV and V, Vestar’s partners have been the largest investors, a fact that Hooper says is important to investors which want to see the interests of the private equity firm aligned with the LPs. Hooper declined to disclose the fund’s LPs, but one long time investor is International Business Machines’ pension plan.