New Mountain pays below average prices for Fund IV portfolio companies

  • New Mountain paid a little more than 9x EBITDA for Fund IV companies
  • Five-year average multiple for LBOs is 11.1x: Preqin
  • New Mountain V targeting $5 bln

New Mountain Capital paid below-average prices on new assets through its assets, a fact limited partners will likely view favorably as the firm raises its fifth flagship buyout fund targeting $5 billion with a $5.85 billion hard cap.

With its fourth fund, a $4.13 billion 2013 vintage, New Mountain paid sellers a little more than 9x its new portfolio companies’ annual EBITDA on average, a Pennsylvania Public School Employees’ Retirement System memo shows. The average leveraged-buyout EBITDA multiple over the past five years stood at around 11.1x, according to Preqin.

In its memo, Pennsylvania PSERS staff deemed New Mountain’s approach to buying portfolio companies “attractive,” adding that the firm typically uses less debt to finance new deals than the rest of the market.

New Mountain, with some $15 billion of assets under management, will use its new fund to invest around $300 million per deal in companies valued at between $200 million and $1 billion, according to the investment memo. The firm is led by Managing Director, Founder and CEO Steven Klinsky.

New Mountain said it had acquired a majority stake in OneDigital Health and Benefits, an employee-benefits company, from Fidelity National Financial in May. The all-cash deal was reportedly valued at around $560 million.

New Mountain declined comment.

Pennsylvania PSERS committed $200 million to New Mountain Partners V at its June 16 meeting, according to its website.

The retirement system previously committed $100 million to Fund IV. That fund, which was roughly 60 percent deployed as of Dec. 31, was netting a 23.8 percent internal rate of return and 1.28x multiple, according to the report. In aggregate, PSERS’s four commitments to four existing New Mountain funds were netting a 13.5 percent IRR and 1.7x multiple as of thatdate.

Pennsylvania PSERS’s private equity program was valued at $7.7 billion, according to a June investment memo. The retirement system had roughly $52 billion of assets as of mid-2016.

Action Item: For more about New Mountain’s fund, view the Pennsylvania memo:

A tourist climbs a glacier, in the mountains of Tien Shan outside Almaty, Kazakhstan, on June 18, 2017. Photo courtesy Reuters/Shamil Zhumatov