Off the Mark: Genstar Falls Short, Late, on First Close for Fund VI

Genstar Capital Partners has taken a slight detour on the way to closing its sixth fund.

Last week, our colleagues at LBO Wire reported that Genstar’s first close totaled more than $600 million for its sixth private equity fund. Already, the first close for Genstar’s sixth fund outpaces the size of all but one of its prior five funds. However, the broader picture isn’t nearly as rosy, sources tell peHUB.

Genstar sought to wrap up its first close on its sixth fund in April, multiple sources confirmed to peHUB.com, and with much more than $600 million. The private equity firm was telling limited partners considering its sixth fund that its target for a spring close was up to $800 million. In other words, the “more than $600 million figure” fell short of even Genstar’s lowest expectations for a first close.

Further, it appears that Genstar has reined in expectations for the remainder of the fund. LBO Wire’s source stated that the fund’s target is a $1.5 billion final close. Sources that peHUB spoke with said the private equity firm was looking for as much as $1.75 billion earlier this year.

Park Hill Group is acting as placement agent for Genstar’s sixth fund. It remains to be seen, sources said, whether the initial $1.5 billion target for Genstar is attainable.

“They aren’t looking to take any more fund of funds,” said one source familiar with Genstar’s fundraising.

To be certain, Genstar’s fundraising trajectory is impressive. Its first fund in 1988 reeled in $85 million and the follow-up fund in 1996 took in $115 million from LPs. Its third fund, a 2000 vintage, raised $221 million, and Genstar more than doubled that for its fourth outing, in 2004 bringing in just over $500 million. Its fifth fund more than tripled its predecessor, bringing in $1.63 billion four years ago. So while it remains to be seen if Genstar can match its fifth fund’s size, the PE firm will still be armed with plenty of dry powder to deploy.

In a newspaper report more than a decade old, Mark Bandeen, then a managing director at Genstar, was quoted as saying the PE firm’s first fund turned a 30% profit over a seven-year span. Figures for Genstar’s second, third, and fourth funds were not available. According to figures posted online by CalSTRS, Genstar’s fifth fund with a 2007 vintage has an IRR of 0.58 to date. Still, this is too preliminary a figure to derive any substantial analysis of Genstar’s most recent vehicle.

Earlier this month, Genstar struck a $185 million deal to sell its Woods Equipment Co., which it had held seven years, to Blount International (this deal was not factored into CalPERS figures). From its current fund, Genstar continues to maintain stakes in, or own, Confie Seguros, a growing insurance provider that focuses on Hispanic clientele; TravelClick, an e-commerce company; and Evolution1, a payment processing and healthcare technology firm that has made acquisitions since the private equity firm’s investment.

Genstar was not available to comment for this story.