Clayton Dubilier & Rice LLC (CD&R) is close to securing $6 billion from investors for its latest private equity fund, just a little more than two months after it began fundraising with a $8.5 billion target, according to sources familiar with the matter.
The quick pace of fundraising reflects CD&R’s popularity with investors. CD&R’s funds had delivered, as of March 31, a 52.8 percent net compound annual rate of return on the $17.3 billion they invested in 66 businesses, according to the New York-based firm’s latest annual review sent to its investors.
CD&R expects to reach the new fund’s hard cap of approximately $9.4 billion and complete fundraising in the first quarter of 2017, after attracting commitment offers from investors totaling as much as $20 billion, the sources said this week.
The sources asked not to be identified because the fundraising process is confidential. CD&R declined to provide any statement.
CD&R’s latest fund, dubbed Fund X, is set to be larger than its previous fund, which amassed $6.25 billion in 2014. That fund, which is now mostly invested, generated a net internal rate of return (IRR) of 20.5 percent at the end of March, according to CD&R’s latest annual review.
The previous fund, Fund VIII, which amassed $5 billion in 2009, generated a net IRR of 27 percent as of the end of March. In the year to the end of December 2015, buyout funds across the private equity industry recorded an average IRR of 17.1 percent, according to market research firm Preqin.
More than 90 percent of CD&R’s existing investors are expected to commit to Fund X, one of the sources said.
In sourcing deals, CD&R places an emphasis on helping companies carve out unwanted assets, rather than acquire companies outright, although it will also engage in traditional leveraged buyouts.
As of the end of March, Fund IX had invested 44 percent of its capital in partnership transactions, where CD&R was chosen as a strategic partner by the sellers of the assets, who retained significant stakes, according to its annual review.
CD&R invests primarily in North America and Europe. Its recent investments include Motor Fuel Group, the second largest independent petrol and convenience retail operator in Britain, TruGreen, the largest U.S. lawn care company, and Kalle, a manufacturer of artificial casings for the protein processing industry.
Photo: Businessman with a briefcase full of money on gray background. Photo ©iStock/Staras