Kohlberg Investors VII LP surpassed the pool’s $1.5 billion target and closed Tuesday at the hard cap, according to a statement. Fund VII has about 50 LPs including: Hamilton Lane Advisors, Partners Group, Teacher Retirement System of Texas, the School Employees Retirement System of Ohio, the State of Wisconsin Investment Board, Allstate Insurance Co. and Metropolitan Life Insurance Co., a source said. Kohlberg Fund VII added some new investors such as PKA-AIP, the Denmark pension fund, as well as the Development Bank of Japan and Norinchukin Bank, the person said.
“We received strong investor demand for this fund, and are deeply gratified by the continued support from our existing limited partners and pleased to welcome the limited partners who have joined our investor group,” said Sam Frieder, Kohlberg’s managing partner, in a statement.
Holcombe Green of Lazard acted as placement agent for Fund VII.
Kohlberg’s last fund raised a similar amount. Kohlberg Investors VI LP collected $1.5 billion in 2007. Fund VI is generating a net IRR of 16.69%, according to Sept. 30 data from the Public Employees Retirement System of Idaho.
PE firms typically spend roughly 18 months fundraising. Marketing for Kohlberg’s Fund VII began in 2011, the source said. Kohlberg hit a first close of about $520 million in September of that year. The PE firm spent a year actively marketing for Fund VII, the person said. The balance of the time was spent on processing, due diligence and closing out investors, the source said.
With Fund VII, Kohlberg set out to diversify its investor base and spent more time marketing in Asia and Europe, the source said. This resulted in more than 20% of committed capital coming from LPs located outside of the U.S., primarily in Europe and Asia,
Freder Frieder said. By comparison, Kohlberg Fund VI had 10% of its LPs from outside the U.S.
Due diligence for Fund VII was much more robust than the prior pool, the source said. Kohlberg typically provides the standard due diligence package to LPs, but some new investors required an extra step, the source said. A few, those that are ILPA members, wanted to incorporate ILPA best practices—mainly regarding reporting and tightening up of clawback mechanics—into partnership agreements, the person said. Kohlberg’s partnership agreements are already LP friendly, the source said, and the firm was already practicing some of the things mentioned, the source said. “We just put it into the agreement,” the person said.
Mount Kisco, N.Y.-based Kohlberg targets middle market firms in industrial manufacturing, consumer products and services (business, financial and healthcare). Kohlberg typically invests between $100 million to $150 million equity per deal.
Fund VII is already 10% invested in two deals, the source said. In July, Kohlberg acquired Aurora Casket Co., a designer and maker of funeral products. The deal was valued at $170 million and Kohlberg invested $70 million of equity, the source said. Kohlberg, in March, completed a dividend recap of the Aurora, Ind.-based company and returned half of its invested capital to investors, the person said.
The PE firm also bought Sabre Industries, of Alvarado, Texas, in September. Sabre produces and makes engineered structures—like towers and polls that are seen along a highway—that are used for electrical infrastructure and wireless networks. The deal was valued at $310 million and Kohlberg invested $75 million of equity. Another $53 million came from co-investors, the source said.
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