Advent gears up for next flagship fund

  • Fund IX likely to be Advent’s largest
  • New fund will seek as much as $15 bln: sources
  • Firm dropped preferred return in prior fund

Advent International is talking to limited partners about its next flagship fund, which may launch early next year and target the largest amount in the firm’s history, sources told Buyouts.

Advent is expected to target at least $13 billion and maybe as much as $15 billion for Fund IX, sources said. In today’s fundraising environment, those totals could go even higher as institutional investors flood the market with capital in search of returns, especially from well-established GPs with proven results.

“U.S. securities laws prohibit Advent from commenting on fundraising activity,” the firm said in a statement.

Advent closed its prior pool, Fund VIII, on $13 billion in 2016, beating its $12 billion target after only six months in the market. Its seventh fund closed on $10.8 billion in 2012.

Advent invests in buyouts, recaps and growth equity deals primarily in Europe and North America. The firm focuses on business and financial services; healthcare; industrial; retail, consumer and leisure; and technology, media and telecom.

Fund VII generated a 19.20 percent net internal rate of return as of Dec. 31, 2017, according to performance information from Washington State Investment Board. Fund VIII produced a 12.75 percent net IRR as of the same date, WSIB reported.

Advent notably dropped a preferred return from its eighth fund, which raised eyebrows among LPs but didn’t hurt the firm’s ability to raise the pool. It’s not clear if Advent will structure Fund IX in the same way.

Offsetting the lack of a preferred return was the carried interest distribution model for Fund VIII. Known as a European waterfall, the GP starts to collect carry only after LPs are paid back all contributed capital, Buyouts previously reported. The other model, more in use in the United States, allows the GP to collect carry after each sale of a portfolio company (as long as the return makes the preferred return). 

Advent is one of several firms getting ready to hit one of the strongest fundraising markets in history. Leonard Green & Partners is expected to launch its next flagship vehicle early next year with a target of at least $10 billion. Leonard Green also is expected to launch its debut small-cap fund alongside the main pool, Buyouts previously reported.

Meanwhile, Blackstone is expected to target $20 billion for its next flagship fund, Bloomberg reported in July.

U.S. private equity and mezzanine fundraising totaled $241.6 billion in 2017, according to Buyouts research. It has slowed this year. As of Sept. 18, PE and mezzanine fundraising stood at $135.7 billion, our data show.

The largest fundraising year on record is 2007, when U.S. firms raised $300.8 billion, Buyouts data show.

Action Item: See Advent’s Form ADV: