Brown Brothers Harriman & Co., a Wall Street firm that goes back nearly two centuries, announced that it closed on its fourth private equity fund, BBH Capital Partners IV LP, raising $517 million. The amount eclipsed the fund’s initial target of $300 million, which the firm set when it started raising money nine months ago.
Like BBH’s previous funds, Fund IV will have a diversified focus, investing in both equity and debt, and both control and minority-stake situations. The firm, which has had a private equity group since 1989, manages $1.35 billion in private equity capital.
While the fund plans to invest in a variety of industries, one of the firm’s three co-managers, Jean Pierre “JP” Paquin, said that opportunities were particularly rich in the technology-enabled service sector, which he said offers good margins and high barriers to entry. Other areas the fund may invest in include healthcare, niche manufacturing and consumer products.
Many of the deals that the private equity group invests in were originally sourced from other parts of BBH, said Paquin. “We benefit tremendously from being part of a larger firm. I’d say 75 percent of our investments have a connection with other areas in the firm,” he said. “When it comes to deal sourcing and due diligence, that’s a real competitive advantage.”
Paquin said one of the main reasons for Fund IV’s fundraising success was returns from previous funds. BBH’s last fund, Fund III, closed in 2007, having raised $206 million. That fund invested in nine companies and has so far garnered IRRs of around 18 or 19 percent, according to Paquin. “For Fund III, we spent a lot of time with our investors. Performance was very strong, and that really fueled their re-commitments to Fund IV,” he said.
It was also timing. The firm started raising money in March, 2011, just as private equity fundraising began to gain steam. But in the 3rd quarter of last year, European debt problems began to dampen investors’ appetite for risk. But by that time, said Paquin, the fund had already gathered substantial momentum. “I think we hit it at a good time,” he said.
In addition to Paquin, the fund is led by co-managers Jeffrey Meskin and Joseph Donlan, who, along with two principals, Bradley Langer and Michael Boylan, have worked together for the better part of a decade.
Fund IV’s investors are a diverse lot, spread among public and corporate pension funds, insurance companies, family offices, endowments, foundations, and high net worth individuals. Investors are also split internationally, with half the money coming from the U.S. and half from overseas, particularly Japan and South America.
The fund, in fact, has already made its first investment, helping W.M. Barr, a maker of specialty cleaning products, to finance its acquisition of Microban International, which makes materials that protect against germs and microbes.
BBH’s placement agent for Fund IV was Evercore and Katten Muchin Rosenman provided legal counsel.