Firms & Funds

Leonard Green officially hits market with flagship, debut small-cap funds

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Photo of John Danhakl, Managing Partner of private equity firm Leonard Green & Partners
John Danhakl, Managing Partner, Leonard Green & Partners, LP, takes part in Private Equity: Rebalancing Risk session during the 2014 Milken Institute Global Conference in Beverly Hills, California April 29, 2014. REUTERS/Kevork Djansezian (UNITED STATES - Tags: BUSINESS) - RTR3N527
  • Firm is raising its debut small-cap fund
  • Next flagship to target at least as much as prior fund
  • Officially hit the market in recent weeks

Leonard Green & Partners in recent weeks officially hit the market with its next fundraising, which could end up tallying over $12 billion, several sources told Buyouts.

The firm is targeting at least $9.6 billion for its eighth flagship fund and $2 billion for its debut small-cap fund. Fund VIII will likely target around $10 billion and could reach $12 billion, one LP told Buyouts in a previous interview.

Erika Spitzer, spokeswoman for Leonard Green, declined comment.

The small-cap fund will include Evan Hershberg, who joined the firm from Oncap, the middle-market investment group from Onex. At $2 billion, the fund will be more likely a middle-market-focused vehicle, an LP previously told Buyouts.

“That is the kind of trend we’ve been seeing across many different managers — grow the main fund above the size they had targeted originally and just start a smaller fund,” the LP said.

Leonard Green was formed in 1989 and is focused primarily on service industries in consumer, business and healthcare, and retail.

Green Equity Investors VII hit its hard cap of $9.1 billion plus a GP commitment of $500 million in 2016, Buyouts has reported. That fund was more than 50 percent larger than Fund VI, which closed on $6.25 billion in 2012.

Fund VII, still early in its J-curve period, was generating an about 8 percent net IRR and a 1.1x total value multiple as of Dec. 31, 2018, performance information from Washington State Investment Board showed.

Fund VI was producing a 15.9 percent net IRR and a 1.6x multiple as of that date, WSIB data showed.

Earlier this year, Leonard Green appeared to recoup all its equity in Mister Car Wash, a Tucson, Arizona, company. Mister Car Wash refinanced more than $800 million in debt and, along with a $250 million loan, used proceeds to pay a $215 million distribution to shareholders, Buyouts reported.

The $215 million dividend followed a $213 million distribution in 2016, Buyouts reported.

Action Item: Check out Leonard Green’s Form ADV here: https://bit.ly/2LPGK4X