Hi Guys,
How does your work/perspective change if you join a PE fund as it begins to raise its next fund? The VPs I have been in contact with are of course spinning this in a positive way (ie you get to see how fundraising works/exposure to LPs/unique experience that's valuable if you want to stay in PE), but I imagine there are drawbacks from an investment perspective. What should I expect in terms of dealflow? Also, how long does the typical process last? This would be the 5th fund, and I would imagine the target is around ~800-1000mm.
Thanks!
Hey OhhThatsGood, I'm here to break the silence...any of these links help you?:
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Fingers crossed that one of those helps you.
Given the size of the fund being raised and that it's there 5th, I would expect that you'll still see some dealflow. It may not be at the same speed as it will be once it closes, but you still have portco's that require add-on acquisitions and might have enough dry powder to pursue platform acquisitions. Also, the fund doesn't need to close before you can start putting the capital to work.
On average, it took 12.3 months to raise a fund in 2017. That number varies depending on the firm, but with 4 funds under their belt they should have an ample LP base to tap into and get quick commitments.
Overall, I wouldn't view a firm that's fundraising negatively. There are, as the VP mentioned, positives to being there for the process. Maybe if you're looking for a 2 year program or it is a 2 year then it might be something to scrutinize more, but if it's career track then don't worry about it.
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Unless the firm has already attempted fundraising and failed, I agree with the VPs that you've been in contact with that it will be a positive experience. Typically the fund documents prevent a PE firm from raising a new fund until it has invested (and reserved) at least 70% of the capital from its existing fund. Optimally, a PE firm will start to fundraising when they cross this threshold. At this point, the PE firm is both fundraising and trying to deploy the remaining capital from the existing fund into new platforms and add-ons. The result is that there is no period of time in which a PE fund is not investing.
Assuming this is the case for the firm you are joining, you can expect that your deal execution experience will be nearly identical to what you would have experienced had the firm not been fundraising. Worse case you probably will just have more work to do while the senior folks are distracted with fundraising meetings or asking you to pull together fundraising materials.
For an established firm whose previous fund is performing well, it doesn't really change much from the junior perspective. Sometimes you get more misc requests to pull or cut data or edit a few slides but it's not too much. At the same time I wouldn't necessarily say there's that much to learn as a junior guy either though, except maybe you get to hear the senior guys refine their pitch from time to time?
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