Today, the Los Angeles buyout shop announced it raised a $2 billion third fund, Gores Capital Partners III L.P. The pool exceeded the firm’s target of $1.5 billion by 30%, according to a statement.
“We are very pleased with the positive reception that we encountered during the fundraising process and are particularly excited about the ongoing support from our Fund II LPs and the terrific group of new, high quality investors who have joined us in this fund,” said Alec Gores, the PE firm’s founder and chairman, in a statement.
But fundraising took a while. In fact, Gores officially began marketing for the pool in June 2009, says Jennifer Kwon, the firm’s VP of investor relations. A first close occurred the following August, when Gores raised $390 million. Another $500 million came with Gores’ second close in December 2009. A final close occurred at the end of January (the fund was originally set to close in November, but some of the firm’s largest investors wanted to delay until 2011 for budgetary reasons, Kwon says).
In all, Gores spent about 18 months fundraising. This compares to the roughly one year the PE firm spent marketing for its second pool, Gores Capital Partners II LP, which raised $1.3 billion in 2007.
“It definitely was a more protracted process than we’ve seen in previous years,” Kwon says of the third fund. “The general market caused us to take longer.”
Kwon declined to disclose any of Gores’ investors. Pension funds, fund-of-funds, financial institutions, sovereign wealth funds, foundations and endowments invested in Fund III. The pool will invest in technology, telecommunications, business services, industrial, consumer and healthcare. Gores typically provides $25 million to $250 million equity per deal.
William Riddle and Holcombe Green of Lazard were the placement agent. Weil, Gotshal & Manges was the law firm.
Gores isn’t the first PE firm to warn about the longer time needed to fundraise. Earlier this month, EnCap Investments said it raised $3.5 billion for its eighth upstream fund. The PE shop spent about 9 to 10 months marketing, nearly twice the amount it previously took. David Miller, an EnCap co-founder and a managing partner, said that while there was much demand, the buyout shop did have to address environmental concerns due to the BP oil spill.
Gores didn’t encounter any issues with investors, Kwon says. However, she said that some LPs were “sitting on the sidelines” during the fundraising and that many new investors chose to invest at the end of the process.
Gores picked up momentum during second half of fundraising with new investors because of “positive press” from five new platform deals (National Envelope, Alliance, JMendel, Cosmo Specialty Fibers and CoBridge), Kwon says.
The PE firm also generated positive buzz with some recent exits. In January, Gores sold Vincotech Holdings Sàrl to Mitsubishi Electric Corp. The sale is expected to produce a 3.3X return and a nearly 50% IRR for Gores. GE, also in January, agreed to buy Lineage Power Holdings from Gores for $520 million.