What’s Up With Madison Dearborn?

Last year at this time, Madison Dearborn Capital Partners was one of the private equity market’s most talked-about firms. It and its consortium partners had just bailed on an agreement to buy Canadian telco BCE for C$34.8 billion, after failing to obtain positive solvency opinions. That move led BCE to sue for a C$1.2 billion breakup fee, which MDCP and its partners vowed to fight.

The Chicago-based firm also was in the midst of raising $7.5 billion for its sixth fund — down from an original $10 billion target — with around $4 billion already secured.

In 2009, however, MDCP fell off the front pages (including ours). It participated in very few deals — including no traditional LBOs we could find — and did not hold any substantive interim fund closes. In fact, the only time MDCP was the focus of a peHUB post was in June, when firm co-founder David Mosher resigned after a 17 year run (he was in charge of investor relations and other non-deal activities).

I spent some time speaking with sources close to the firm, and learned the following nuggets:

  • MDCP VI remains in fundraising purgatory, stuck at just a tick above $4 billion. The firm wants to hold a final close next quarter, but is unsure about how much more fund capital it can secure.
  • Early investments out of MDCP VI are being co-invested 50/50 with MDCP V, because the earlier fund has unexpected dry powder due to the BCE deal collapse. Continues to make me wonder how badly MDCP really wanted to get BCE done in the end, given the flexibility afforded the firm by a deal failure.
  • MDCP invested around $300 million into a small handful of deals in 2009. These typically were “structured equity” transactions, like leading a $360 million September investment into NextG Networks. 
  • MDCP distributed between $630 million and $650 million to LPs in 2009, often based on share sales of public portfolio companies
  • Benjamin Chereskin, an MDCP co-founder and managing director, left the firm in September.
  • The battle over the BCE breakup fee continues, which means the only money handed over so far has been to attorneys.