Vestar explores Fund V revamp with Goldman and AlpInvest

Vestar Capital has been in talks with Goldman Sachs Asset Management and AlpInvest Partners to restructure its fifth fund, two people with knowledge of the talks told Buyouts.

Whether a deal will materialize is unclear, one of the people said. The idea has not reached the point of an LP vote, sources said.

Vestar is working with Evercore on the idea. A spokeswoman for Vestar did not respond to a request for comment.

Vestar closed Fund V on $3.7 billion in 2015. Four companies — two publicly traded and two private — are left in the fund, according to an LP with knowledge of the deal.

The firm, formed in 1988 by seven principals of First Boston Corp’s management buyout group, would like more time to exit the remaining portfolio companies, sources said.

The idea for Fund V could include giving LPs the option to sell their stakes at a discount to net asset value as of Sept. 30, 2017; selling a portion of their interests now and deferring the balance for 18 months months to try and sell at a higher price; or roll their interests into a newly created vehicle with a four-year term that will house remaining portfolio companies, sources said.

It’s unclear whether the deal would include a shot of fresh capital into a new fund. Vestar has been in market, targeting $1 billion for its seventh fund.

Vestar closed its most recent pool, Fund VI, in 2013 on $804 million, well under its $3.5 billion target. Fund VI was producing a 1.7x multiple and a 34.13 percent net internal rate of return as of Sept. 30, 2017, Washington State Investment Board performance information shows.

Fund V was generating a 1.3x multiple and a 4.32 percent net IRR as of Sept. 30, 2017, Washington State data shows.

The firm’s fourth fund, which closed on about $2.5 billion in 1999, was generating a 1.8x multiple and a 13.48 percent net IRR as of that date, Washington said.

Daniel O’Connell is CEO of Vestar. He is majority stockholder of the corporation that owns Vestar’s management company, the firm’s Form ADV shows.

A spokesman for Goldman declined to comment, while a spokesman for AlpInvest did not respond to a request for comment.

Action Item: Check out Vestar’s Form ADV here: http://bit.ly/2Fg4n3u

Photo of Daniel O’Connell sourced from Vestar’s website