- At $3.5 bln hard cap, new fund would be almost double Fund III’s size
- Firm’s typical investment multiple falls well below mid-market median
- After allocating heavily with co-investment, Siris to take a larger share of each deal
Siris Capital is projected to close its new flagship fund in March, according to LP memos obtained by Buyouts. Siris Partners IV is targeting $3 billion with a $3.5 billion hard cap.
The memos were prepared by StepStone Group and Connecticut Retirement Plans and Trust Funds. Connecticut Treasurer Denise Nappier, who oversees Connecticut’s $32.5 billion pension system, is weighing a commitment of up to $50 million to Fund IV.
Should Siris hit its $3.5 billion hard cap, Fund IV would be almost double the size of the $1.81 billion vehicle the firm closed in in 2015. The Connecticut and StepStone memos highlighted the enlarged target as a concern — LPs are generally wary of firms shifting their investment strategies to accommodate larger fund sizes — though the firm’s use of conservative capital structures and value-oriented approach might serve as a mitigant.
On average, Siris has purchased companies for just 5.5x of their annual Ebitda, considerably less than the 9.2x average StepStone recorded for mid-market deals.
Furthermore, Siris plans to make the same number of investments, at the same size, as it did with Fund III, the StepStone memo shows. Roughly half of Fund III’s investment capital — more than $1 billion — came from co-investors.
“With a larger fund, Siris will be taking a larger allocation of the deals, but will continue to offer co-investments to LPs, at a reduced ratio of 25 [percent],” according to StepStone.
As with its previous funds, Siris will use Fund IV to acquire mid-market companies in North America, typically allocating between $250 million and $700 million per deal. The firm recently acquired Intralinks Holdings, which provides data-sharing and collaboration services, for roughly $1 billion.
The fund is charging limited partners a 1.75 percent management fee on committed capital during its investment period, the StepStone memo says. Afterward, the fee falls to 1.5 percent of invested capital, minus realized investments or write-downs. Park Hill Group is placement agent on the fundraising.
Siris Capital declined comment.
Action Item: For more on Siris Capital, visit https://siris.com
A man works with a laptop at the airport in Hanoi on October 18, 2017. Photo courtesy Reuters/Kham