Big, established PE funds drive record fundraising

Happy Wednesday!

Tech deal: Harvest Partners announced a big tech deal this morning, investing in real estate software provider MRI Software, joining TA Associates and GI Partners. TA also is investing more money in the company.

Last year, PE Hub reporter Milana Vinn wrote that GI and TA were exploring options for MRI Software. At the time, Vinn wrote that MRI Software could sell for between $2.5 billion and $3.5 billion.

The company, which provides real estate and investment management software to real-estate owners, investors and operators, had received inbound offers from a few financial sponsors and strategics, the story said. In 2009, Vista Equity acquired the company, then known as Intuit Real Estate Solutions. Vista sold the company to GI Partners in 2015. GI sold half of MRI in May 2017 to TA and since TA’s investment, MRI Software completed 14 add-ons.

Fundraising: The average size of private equity funds raised in 2019 was the highest since at least 2014, according to fresh fundraising data from Private Equity International. The average size was $662 million, up from $590.2 million in 2018.

Overall, PE firms raised $537.2 billion last year, the highest amount raised since the financial crisis, and up 16 percent from 2018. While total capital raised has soared, the actual number of funds closed grew modestly.

This plays into the dynamic we’ve seen since the global financial crisis where the biggest firms are taking up more LP capital as investors look to firms they trust. This squeezes out investor appetite for anything they don’t know, making it harder for new shops to find capital.

Established firms are taking advantage of this dynamic by coming back quicker to market with new funds, as well as creating adjacent products focusing on other strategies like credit or smaller companies. While this is helping drive robust fundraising in the industry, it’s also establishing a system of haves and have-nots: firms that can raise without a problem, and others who have to work hard for capital.

Check out PEI’s story here.

With fundraising numbers as strong as ever, activity does not appear to be slowing as we move into 2020, according to sources. LPs have a robust pipeline of firms coming to market, with funds that will probably raise within months. The challenge for LPs is figuring out which managers will be able to withstand an eventual downturn.

“Given the 10-year bull run we’ve been having and the economy up and to the right after the global financial crisis, all these managers all look pretty good right now,” an LP told me recently. “There hasn’t been any significant downturn to shake out lesser skilled managers. We’re seeing a lot of managers able to raise capital today that may not have been able to raise in the early 2000s.”

Top Scoops
Wynnchurch Capital is targeting $1.4 billion for its fifth fund, capped at $2.2 billion, I wrote on Buyouts. The fund has a six-year investment period. Check out the story here.

EIV Capital unveiled its fourth fund, as the Houston-based private equity firm looks to leverage promising midstream opportunities in an otherwise slow energy fundraising market, writes Kirk Falconer. Check out the story here.

That’s it! Have a great Wednesday. Hit me up with tips n’ gossip, trends, feedback or whatever at cwitkowsky@buyoutsinsider.com, on Twitter or find me on LinkedIn.