”We are very committed to growing this business,” said Jeffrey Raich, managing director, founding partner and head of M&A at Moelis, in an interview with Buyouts. ”We like the opportunity. We will obviously provide the resources to these individuals to be successful on our platform. Our hope and ambition is to be a market leader in this space.”
Moelis announced this week that it had hired four managing directors to lead its new Private Funds Advisory Business. All four will report to Chairman and CEO Ken Moelis.
The new MDs are Dave Brown, Patrick S. Dunleavy and Christopher D. Kirsten, all of whom will work out of New York, and Zaid Abdul-Aleem, who will be based in Chicago. Brown and Abdul-Aleem will join “shortly,” while Dunleavy and Kirsten are due to start in September, according to a spokeswoman.
Brown and Dunleavy had been managing directors and co-heads of Greenhill’s Private and Real Estate Capital Advisory Group; Kirsten had been a managing director and chair of the Private Capital Advisory Group; and Abdul-Aleem had been a principal in the Private Capital Advisory Group. Prior to 2008, Brown, Dunleavy and Kirsten had worked together in the fund placement group at Lehman Brothers.
The new team will have a broad mandate, said Raich, including the raising of funds for sponsors of buyout, growth equity, turnaround, distressed debt and special situations funds. Real estate will not be a “core focus,” he said. Greenhill has had particular success in the last few years raising money for emerging managers—funds such as the $432 million One Rock Capital Partners LP and the $641 million Siris Partners II LP. Raich said the team’s focus would “include first-time funds,” but added that serving more established firms would “also be a substantial and significant part of our business.”
Raich declined to comment on whether the firm had landed any early clients for its placement business; nor would he comment on whether the new team had any legal or related obstacles to taking Greenhill clients with them to Moelis. In April, sister website peHUB reported that Greenhill was helping to raise a debut fund for Medina Capital, which had collected at least $70 million toward a $250 million target. Last May Buyouts reported that Greenhill had been hired by MC Credit, a firm with backing from billionaire hedge fund manager Louis Bacon, to help raise a $750 million debt fund. Buyouts was unable to reach an executive at Greenhill for comment on the status of those funds.
Altogether Moelis over the last five years has advised on some $300 billion worth of M&A transactions involving sponsors. The firm considers itself a leader in advising sponsors on exits, and Raich suggested many of those firms could be potential clients for fundraising services. Raich said he sees “synergies” between what Moelis does on the advisory side and what it can now do in fundraising. Recent deals involving sponsors where Moelis has played an advisory role include Tinicum’s majority investment and recapitalization of F+W Media Inc. this May; the April purchase of a controlling stake in Flywheel Sports Inc. by a consortium led in part by Catterton Partners; and the December 2013 sale of Arden Group Inc. (Gelson’s Markets) to TPG Capital.
In June 2012 Buyouts reported that Tinicum was raising a $1.5 billion fund and might use a placement agent to help reach its target. Raich declined to comment on the prospect for Tinicum becoming a Moelis client.
Moelis isn’t the only investment bank looking to make a splash in the placement business. Last month investment bank GCA Savvian Corp announced that it had hired veteran fundraisers Mac Hofeditz and Shannon Zoller to launch a fund placement business. The firm plans to raise North American private equity funds in the range of $100 million to $1.5 billion. Some of the founding partners at the newly formed investment bank Hycroft, including ex-Greenhill Managing Director Neil Banta, also have a background in fund placement.
The placement business has no shortage of players. The 2014 edition of the Guide To Secondary Buyers and Placement Agents, published by Thomson Reuters (publisher of Buyouts), lists 41 placement agents. But the pie is also growing. U.S. buyouts and mezzanine sponsors raised $186 billion last year, up from $161 billion the year before, and this year has gotten off to a hot start, with $39 billion raised in the first quarter, according to Buyouts.
Roughly a third of North American buyout firms use a placement agent, a percentage that has stayed reasonably steady over the last decade, according to surveys. It isn’t unusual for sponsors to pay roughly a 2 percent fee to placement agents for money raised from investors new to a fund, although there is a great deal of variation in the amount, timing and form of fees.
(Correction: Zaid Abdul-Aleem’s last name was misspelled on second reference in the original version of this story.)