Lee Equity sets sights on a new fund in 2018

  • Fund I closed in 2008 at ~$1.1 bln
  • An interim bridge fund raised at least $315 mln in 2016
  • New York firm promoted five team members in February

Lee Equity Partners plans to raise its next fund in 2018, the firm’s founder, Thomas H. Lee, said at Emerging Manager Connect East.

Lee also indicated he would move out of the day-to-day mix at some point during the next fund life. “That’s the way of the world,” he noted.

“An institution looking at me says, ‘gee, you’re a young 73,’ but if I’m going to be there five or six years to invest; five or six years to harvest; two or three automatic one-year extensions … ‘I don’t want some 88-year-old running my fund,’” Lee said.

The comments from the private equity billionaire came July 26 at the Harvard Club in Manhattan during a keynote interview with BuyoutsChris Witkowsky.

A spokeswoman with Lee declined to comment on a potential target for the next fund.

The New York firm’s Fund I closed on about $1.1 billion in 2008, a couple years following the firm’s inception. In March 2016 it raised about $315 million for a short-duration bridge fund through a secondaries process, a Form D filing at the time showed. Whether the interim bridge fund raised additional capital is unclear.

Lee Equity, which focuses on both control buyouts and growth-capital financings, was launched in 2006 after Thomas H. Lee departed from his eponymous firm, Boston’s Thomas H. Lee Partners.

The PE group targets equity investments of $50 million to $100 million in companies with enterprise values of $100 million to $500 million.

While the founder didn’t offer detail on eventual succession plans, Lee Equity’s investment team has been working together since the founding.

The sponsor in February promoted five investment professionals. Geoffrey Lieberthal, Rahul “Billy” Nand and Collins Ward all became partners of the firm, while Eric Hsu and John Ettinger were promoted to vice president and senior associate, respectively.

Asked by a conference attendee about the shift to a second generation of CEOs in the PE community, Lee commented: “I think the main message is that there’s an entrepreneurial spirit that drives [our partnership group] and I hope it doesn’t get lost in a technocratic way.”

Lee Equity, for its part, has been both a busy seller and buyer in recent months.

Buyouts reported earlier this month that Lee Equity’s auction for Eating Recovery Center was expecting to field second-round bids in mid-July. The Moelis-run sales process for the eating-disorder-treatment company is said to be guiding for a $500 million-plus valuation.

In other recent activity, Lee Equity in April exited its investment in WealthTrust via a sale to HighTower. In November, it agreed to sell Universal American Corp to Wellcare Health Plans Inc. It also struck a deal that month to merge existing portfolio company Carlile Bancshares with Independent Bank Group.

As a buyer, Lee Equity in December bought K-MAC Holdings Corp. The firm partnered with entrepreneur Martin Varsavsky to form Prelude Fertility in October.

Action Item: Lee Equity’s current portfolio: http://www.leeequity.com/portfolio

Thomas H. Lee (left) is interviewed by Buyouts’ Chris Witkowsky at Emerging Manager Connect East at the Harvard Club in Manhattan on July 26, 2017. Photo by Robert Daniel, Buyouts.