Many buyout firms would like to join the $1 billion club, and they’re so very close. Before the recession, it was almost assumed that your average-performing $700 million firm would come back to market with a $1 billion vehicle. Not the case anymore. As one LP said, “$700 million is the new $1 billion.”
The latest example of this leveling-off of fund sizes is Snow Phipps Group. The New York-based buyout firm has come to market with a $700 million target for its second fund — only a slight jump from its $620 million debut vehicle. “Everyone expected they would raise $900 million or more,” said a source familiar with the situation. Snow Phipps declined to comment.
The firm was founded in 2005 and invests in middle-market companies in the specialty franchising, basic and process industries, apparel and luxury retail, media technology, specialty finance, IT services and telecommunications equipment and industrial components sectors.
A similar “adjusted target” situation occurred with Arlington Capital, which was expected to graduate from a $585 million fund to the $1 billion mark on its third vehicle. Instead, the fund has a $750 million target. The firm’s former placement agent, UBS, viewed even that increase as too steep, leading Arlington Capital to drop UBS for Credit Suisse.