Healthcare-focused buyout firm Ferrer Freeman & Co. has indefinitely suspended efforts to raise its fourth fund, after more than a year of trying. It plans to concentrate on generating liquidity from its existing portfolio, and may return to market in six to twelve months if successful.
“Their effort to raise a new fund had not gone positively,” one source said.
If Ferrer does return to market, there is a chance that the senior investment team may look different, although we have not been able to nail down specifics. If it doesn’t fundraise — or again proves unsuccessful — the firm could head into wind-down mode.
Ferrer has received some good news on the exit front of late. Last week, it agreed to sell its position in spinal surgery device company K2M to Welsh, Carson, Anderson & Stowe. Ferrer led a $21.5 million investment round into K2M in 2006, and will retain a minority stake.
Ferrer also apparently owns a piece of MultiPlan, the healthcare services firm that is being sold to BC Partners and Silver Lake Partners for $3.1 billion. The Carlyle Group, which owns MultiPlan, declined to comment.
Ferrer has faced challenges with its last fund. Ferrer, which manages over $900 million, has raised three funds. The first two funds are invested and Ferrer is investing from its third fund.
Ferrer’s debut fund closed with $200 million in 1997 and made 12 investments: Four companies went public, four were sold and four are still active, according to data from Thomson Reuters.
Ferrer’s second fund, FFC Partners II LP, raised $291 million in 1999. The fund, which made nine investments, had an IRR of 7.6% as of Dec. 31, 2009, according to CalPERS.
We have not been able to find current performance data for the firm’s third fund, which closed on $400 million in 2004. CalPERS had been an LP in that vehicle too, but appears to have since sold the position (last data we have is a -4.6% IRR at year-end 2007).
Ferrer is not alone in its fundraising issues. For many PE firms, marketing is off. Globally, buyout shops raised $41.3 billion in second quarter, the lowest total since 2003, according to data from Preqin. “The fundraising environment is really difficult,” one private equity executive says. “You don’t see guys going out. It’s that bad.”
Several calls to FFC were not returned.