This is what happens when LPs are cash-strapped: PE interests are piling up on the secondary market, there’s no debt to do deals and no companies want to sell. PE is out of vogue. Not unlike conspicuous-consumption-in-a-recession out of vogue.
The fate of the fundraising processes that have sputtered to a standstill hangs in limbo–a little place LPs have been calling “fundraising purgatory.” This is especially true for many first-time funds, with no existing LPs to rely on to at least participate pro rata.
Of course, the first-time funds are also the slowest to admit trouble, claiming they’re still working away, despite prolonged periods with no sign of a close. Others have come clean. In recent weeks, the following firms have put their fundraising on hiatus until the storm passes, according to reports at peHUB or elsewhere:
- Riverside Company has placed fundraising for its second micro-cap fund on hiatus.
- Ripplewood has put fundraising for its third fund, a vehicle seeking $2.5 billion, on hold. The firm had been marketing for a year before holding a first close.
- Providence Equity Partners scrapped plans to raise a $1 billion small and middle market fund.
- CapitalSouth Partners has extended the closing date of its third fund, targeting $330 million, by a full year.
I should note that there are quite a few hurdles involved in the “storm passing,” since even if the debt markets return and deal activity picks up, it’ll only hurt cash-strapped LPs. They will still have a real problem meeting capital calls, especially if liquidity events remain rare.
Other firms aren’t quite to the purgatory stage. They’ve gathered commitments, but lowered their expectations. This seems like a healthy, non-delusional approach (What are you going to do with that money other than collect fees?). Among the lowerers:
- Blackstone Partners V: Lowered from $20 billion to $13.5 billion
- Madison Dearborn Capital Partners V: Lowered from $10 billion to $7.5 billion
- Carlyle Global Financial Services Partners: Lowered from $5 billion to $1 billion or more
- Carlyle Partners V: Closed on $13.7 billion, down from its $15 billion target.
- KKR 2009 Fund LP: Set target at $8 billion to $10 billion, significantly lower than the prior fund’s $17.6 billion.
- Hellman & Friedman Capital Partners VII: Lowered hard cap from $11 billion to $10 billion (according to LBO Wire).
- Riverwood Capital: Lowered target from $1.25 billion to $750 million.
- Thoma Bravo: Lowered target from $1.5 billion to $800 million.