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Fundraising Notes

Private equity fundraising has broken volume records each of the past three years (including 2006), and a reporter yesterday asked if I thought the trend would continue in 2007. My answer was affirmative.

From a buy-side perspective, I expect the limited partner community to increase its already-ravenous private equity appetite. Three reasons:

1. A continued influx of new institutional money from Asia and MENA;

2. Rising public blue-chips raise the hard dollar amounts of alternative allocations and;

3. Returns have been outstanding of late, and they will only improve as the IPO window keeps inching up. Oh, and private equity is the economic equivalent of that popular kid who everyone wanted to befriend.

The sell-side perspective is a bit dicier. The record-breaking needle has been largely moved by mega-funds, and heavyweights like Blackstone, KKR, Permira and TPG are not expected to raise new funds in 2007. But there should still be enough action on that end of the spectrum, with expected closes from Apax Europe, Carlyle, CCMP Capital, Hellman & Friedman, Providence Equity Partners and Silver Lake Partners. In addition, there likely will be a handful of new superstar spinouts (i.e., next version of Centerbridge) and continued inevitable formation of new upper-middle-market funds.

*** One firm that probably will hold a final close this year is Thomas H. Lee Partners. While perusing the Yale SOM Private Equity conference agenda (because I like seeing my name in someone else’s print), I noticed the following note in the bio of TH Lee co-president Scott Schoen: “THL Partners… is currently investing Thomas H. Lee Equity Partners VI, with closed and committed capital of approximately $8 billion.” That’s the revised fund target (original was $7.5 billion), with a max cap believed to be around $9 billion.

*** 3i Group yesterday announced that it had raised Euro 5 billion for a new middle-market fund focused on Europe. I’m still trying to get my head around the “middle-market” part of a fund that large…

*** Quiz Time: Can you name the buyout firm that raised a fund within the past 12 months, but which already is talking to LPs about needing some additional dough?