PeHUB-New Mountain Capital seen fundraising for buyout pool

Tue Sep 4, 2012 6:33pm EDT

* New Mountain fund III is more than 70 percent invested

* Fund III yet to report a full exit

* First close for fund IV expected in 2013

By Luisa Beltran

NEW YORK, Sept 4 (peHUB) - New Mountain Capital is expected to begin marketing for its latest buyout fund later this year or early in 2013, three sources said.

New York-based New Mountain, which manages more than $9 billion in assets under management, collected $5.1 billion with its third fund in 2008. That pool is more than 70 percent invested, persons say. Private equity firms usually begin marketing once funds are about 70 percent invested.

"They are expected to start fundraising for Fund IV late this year or early next year," a placement source said.

New Mountain will be competing against much bigger buyout shops for capital. Apollo Global Management, which has $105 billion of total assets under management, is expected to begin fundraising for its latest buyout fund later this year. Apollo is said to be seeking up to $12 billion for its latest flagship fund. Bain Capital, which has roughly $65 billion in AUM, also began marketing for its latest mega private equity fund in June, peHUB has learned. The target for Bain Capital Fund XI is $6 billion.

It's unclear how much New Mountain is expected to raise with its fourth fund. New Mountain is currently not marketing but will likely secure a first close for fund IV in 2013, a different source says.

New Mountain has completed some partial exits from its third pool but not a full one, persons say. Two placement agents said the private equity firm may delay fundraising until it secures a full exit. This is untrue, a third source said. New Mountain typically waits until it is raising a new pool before it tries to "harvest" a fund. For example, New Mountain, when it closed its third fund in 2008, hadn't secured any exits from its second pool, the source says. Fund III ended up raising $5.1 billion, which was $2 billion more than its target. Fund III has generated a net IRR of 7.3 percent, according to Dec. 31 data from CalPERS.

New Mountain, using dividends and gains, has returned hundreds of millions to investors of its third fund, the third source says. The private equity firm invested roughly $300 million in New Mountain Finance Corp, a publicly traded business development corporation, according to SEC filings. New Mountain has return more than $200 million to investors and retains its stake in the company, the person says. The investment came from New Mountain's third fund, regulatory filings indicate.

Last week, New Mountain did announce a large exit. New Mountain is selling Deltek to Thoma Bravo after owning the enterprise software provider for seven years. The sale is valued at $1.1 billion and New Mountain is expected to make roughly five times its equity investment in Deltek. However, the Deltek investment comes from New Mountain's second fund. Fund II, which raised $1.55 billion in 2005, is generating a net IRR of 10.4 percent, according to CalPERS.

Officials for New Mountain could not be reached for comment.