If you’re a private equity firm in the midst of protracted fundraising, there are three things you want to have happen (in descending order):
- Circle a limited partner commitment.
- Get invited to pitch your fund in front of a group of wealthy playboys from Dubai.
- Sell an existing portfolio company at a high multiple
The reason for #3 isn’t that it produces a fat carry check, although that’s certainly a nice side benefit. No, it’s because it helps engender #1 and (to a lesser extent) #2.
And that’s certainly what Halyard Capital is thinking today, after agreeing to sell marketing services company Tranzact to Veronis Suhler Stevenson for $185 million in cash. The deal represents a 12x multiple of Halyard’s initial investment, and an IRR of around 85 percent.
This could be the deal that helps Halyard finally close its second fund, which has been on the market for two full years. The New York-based firm was launched in 2000 with Bank of Montreal as its sole limited partner, to focus on lower-middle-market opportunities in the media, communications and business services sectors. By 2005, the Halyard team had decided to raise a second fund with third-party commitments, although BMO agreed to commit $150 million as a cornerstone investor. It has since closed on around $250 million, but still wants to reach $400 million by the end of Q1 2008 (with most verbal commitments in by the end of 2007).
Tranzact won’t push Halyard all the way to the finish line, but it could help it get much closer.