Quick Turnaround for Turnaround Fund Raising –

Questor Management Co. late last month held a first and final closing on $800 million for the firm’s second turnaround fund, said Robert Shields, a managing director at the Southfield, Mich.-based firm. Fund II also will mark the firm’s first foray into investing internationally, he said.

Questor kicked off fund raising in the third quarter of last year, shooting for a target of $650 million (BUYOUTS July 20, 1998, p. 6) and looking to garner the majority of its capital from prior limited partners, Mr. Shields said.

Although the fund raising ultimately drew the majority of its capital from investors in Questor’s first fund-including Michigan State Treasury, Los Angeles County Employees Retirement Association, Chase Bank, American International Group, Salomon Smith Barney and Comerica Bank-at least one new investor came on board for Fund II. California Public Employees’ Retirement System made a $75 million commitment to the vehicle; the commitment likely comes as a follow-up to the decision last year by the $140 billion pension to increase its exposure to turnaround investments while simultaneously paring back its relationships with larger firms that target U.S. buyouts (BUYOUTS Aug. 3, 1998, p. 4). Officials at CalPERS could not be reached for comment.

Partners at Questor committed more than 5% of the Fund II’s total, although Mr. Shields declined to disclose the exact size of the G.P. stake.

Fund II also sports an international component-an element the firm’s $300 million debut vehicle, which closed in 1995 (BUYOUTS Feb. 5, 1995, p. 6), did not have-that allows as much as 20% of the fund’s capital to be invested outside of the U.S.

Mr. Shields said Questor likely will focus on international investments in Western Europe and will continue its strategy of targeting controlling interests in underperforming and distressed companies with revenue between $100 million and $2 billion. “The turnaround industry isn’t as developed in Europe as it is in the U.S.,” he said.

Distressed Picks Up in Europe

However, competition may be growing for turnaround investments in Europe as, at press time, it was reported that U.K.-based private equity group UK Active Value also has raised an $800 million turnaround fund that will target deals in the U.K. and continental Europe. Partners at UK Active could not be reached for comment.

Although Questor has yet to set up European offices, Mr. Shields noted that Jay Alix & Associates-the crisis and turnaround consulting firm founded by Questor co-founder Jay Alix-already has London offices and that the two groups will continue to work together on some of the firm’s investments.

In addition to Mr. Alix and Mr. Shields, Questor’s other partners include co-founder Dan Lufkin, also co-founder of Donaldson, Lufkin & Jenrette, and Henry Druker and Wallace Rueckel, both principals.