- Firm to invest Gores fortune on deal-by-deal basis
- No immediate plans for new institutional fund
- Searches for investment with second SPAC
Gores Group has gone through some big changes over the past few years, as the performance of the main funds struggled and executives have left to start their own shops.
For the immediate future, Gores is not planning on raising a new institutional fund, sources told Buyouts in recent interviews. Instead, the firm will invest the personal capital of Founder and CEO Alec Gores, and select outside investors, on a deal-by-deal basis. The firm could choose to raise a new fund at some point in the future, sources said.
This will enable Gores “to be more nimble and targeted in [its] approach,” a source said.
The firm also will continue to raise special-purpose acquisition vehicles from public investors to acquire specific companies. Gores launched its first SPAC, Gores Holdings, on $375 million in 2016. The firm used the pool to buy Hostess Brands along with capital from Gores and other investors in a $2.5 billion transaction.
Gores is searching for deals using its second SPAC, which in 2017 raised $400 million, and plans on expanding its SPAC franchise after that, sources said.
These structural changes will lead to fewer deals and will be a return to the firm’s roots, sources said. Gores operated deal by deal for several years before it raised $400 million for its first institutional fund in 2003. Gores was formed by Alec Gores in 1987.
Gores last raised $2 billion for its third fund in 2011. It closed its second fund on $1.3 billion in 2007. The debut fund was generating an 8.4 percent internal rate of return as of June 30, 2017, information from Florida State Board of Administration shows.
Fund II was producing a 7.9 percent IRR and a 1.39x total value multiple as of Sept. 30, 2017, according to performance numbers from the Oregon Public Employees Retirement Fund. Fund III, the largest pool, was generating a 4.9 percent IRR and a 1.16x multiple, Oregon said.
The firm in 2012 also launched its small-capitalization business, raising $300 million. The small-cap fund is the firm’s best performing vehicle, producing a 14.6 percent IRR as of March 31, 2017, California State Teachers’ Retirement System data shows.
Gores will manage out the small-cap portfolio. One executive from the small-cap team, Jon Gimbel, left the firm and joined another Gores executive, Anthony Guagliano, in forming Gallant Capital Partners. That fund, formed with support from Alec Gores, is in market targeting $300 million.
Other former Gores executives, Jordan Katz and Tim Meyer, left in 2014 to form Angeles Equity Partners. Katz and Meyer co-led the industrials vertical at Gores.
David McGovern, formerly head of M&A at Gores Technology Group, which Gores used to be called, left and formed Marlin Equity in 2005.
Update: This story was updated to include more recent fund performance numbers from Oregon and additional information about potential future fundraising.
Action Item: Check out Gores Form ADV here: http://bit.ly/2E3YGFk
Photo of Alec Gores sourced from Gores website