Cressey & Co. Creeps Toward Lowered Target With Latest Close

After two years in the market, buyout firm Cressey & Co. has gathered just over $300 million in commitments toward its first fund since spinning off from Thoma Cressey Bravo in 2007.

The effort had an initial target of $500 million, but the firm has since lowered that figure to around $400 million, peHUB has learned. Cressey & Co. plans a final close in the first half of 2010, with Park Hill and Shannon Advisors serving as the fund’s placement agents. A call to partner Bryan Cressey was not returned.

The firm split amicably from Thoma Cressey Bravo two years ago, in order to separate funds focused on different industries. Cressey & Co. invests exclusively in healthcare services companies while Thoma Bravo buys companies in software, education, distribution, financial services and consumer goods and services. In March, Thoma Bravo closed its first solo fund with $822.5 million in capital commitments.

Cressey argued at the time that an increase in life expectancy will drive the need for more health care services. He also noted that buyout firms to shy away from health care services because of regulatory complexities, giving his firm less pricing competition on deal opportunities.

Since the split, Cressey & Co. has added Bill Frist, former U.S. Senate Majority Leader, as a partner. Senator Frist was the first practicing physician to be elected to the U.S. Senate since 1928. The firm also partnered up with Ralph Davis, chairman of law firm Waller Lansden Dortch & Davis LLP.

Cressey and Thoma Bravo continue to share an office space (which of course made me wonder about LP jealously issues) and jointly manage their past funds (including one with Select Medical Corp., which recently filed for a $300 million IPO). Thoma Cressey Bravo’s two most recent funds, Thoma Cressey Bravo VII LP and Thoma Cressey Bravo VIII LP have performed relatively well, with Fund VII posting a return in the high 30% range (at year-end 2008, based on an earlier peHUB story). Fund VIII is too early to tell.

Fund VI, on the other hand, has had a rough go of it, thanks to exposure to companies serving the telecom space. Those businesses watched their customers crumble under the 2001 tech and telecom meltdown. Fund VI will likely break even, with returns ranging from 2% to 6%.

So why is Cressey & Co. having a difficult journey to close its fund? In July 2008, Buyouts quoted one potential investor saying he passed on the fund in lieu of another healthcare fund with a larger team and a wider mandate of healthcare investments than just services companies.