US private equity firms raised USD58.5bn in 81 funds during the first quarter, up nearly 32 per cent from the USD44.3bn raised in 68 funds during the first three months of last year, accor
US private equity firms raised USD58.5bn in 81 funds during the first quarter, up nearly 32 per cent from the USD44.3bn raised in 68 funds during the first three months of last year, according to industry newsletter Dow Jones Private Equity Analyst, which also reports that 2007’s full-year record total now stands at USD309bn.
The largest fund raised in the quarter wasn’t a buyout fund but Goldman Sachs Capital Partners’ GS Mezzanine Partners V, which accounted for nearly one-third of all capital raised in the quarter with USD20bn – a record for a mezzanine investment fund.
By contrast, leveraged buyout fundraising fell 22 per cent, from USD35.2bn raised by 34 funds in the first quarter of 2007 to USD27.6bn raised by 33 funds. While a number of large buyout funds are in the market, it is now taking them longer to close their funds.
‘These figures aren’t really too surprising,’ says Jennifer Rossa, managing editor of Dow Jones Private Equity Analyst. ‘The shake-up in the credit markets has slowed the pace of buyout deals, making it harder for large firms like Blackstone Group to justify raising big new funds.’
Other private equity strategies that are less dependent on the credit markets did better. Venture capital funds in particular saw a big increase in activity in the first quarter of 2008 with 32 funds closed, 10 more than last year. They also raised 29 per cent more capital with just under USD5bn, compared with USD3.8bn a year earlier.
‘With the big buyout funds no longer taking up all the attention of private equity investors, other strategies like venture and mezzanine are gaining ground,’ Rossa says.
WL Ross closed the largest buyout fund of the first quarter with its USD4bn WLR Recovery Fund IV, which focuses on distressed debt opportunities. The largest venture capital fund was launched by Essex Woodlands Health Ventures, which raised USD800 million for its Essex Woodlands Health Ventures VIII fund.
European private equity firms also saw an upswing in investment in the first quarter with nearly USD17.3bn invested in 38 funds, a 24 per cent increase over the nearly USD14bn invested in 47 funds in the same period of 2007. Most of the increase in European buyout fundraising came from Bain Capital’s new European fund, which closed at around USD4.8bn.
Says Rossa: ‘European buyout fundraising numbers also got a boost from several funds targeting Eastern Europe and Russia, where opportunities for buyouts are still seen as strong.’ Outside the buyout and corporate finance sector, there were declines across the board for other categories of fund such as mezzanine, venture capital and funds of funds, while no secondary funds were launched in Europe in the first quarter.
