Goldman Makes Minority Investment in Littlejohn
18 August 2016 - 8:20AM
Dow Jones News
Goldman Sachs Group Inc. made its first direct investment in a
private-equity firm, taking a minority stake in Littlejohn &
Co.
The investment in Littlejohn, with more than $4 billion under
management, was made through Goldman's Petershill program, a fund
strategy under the New York firm's Alternative Investment &
Manager Selection group, or AIMS, which is known for backing
hedge-fund managers.
Goldman said in a news release that Petershill acquired a
passive, nonvoting stake in Littlejohn representing a less than 10%
interest in the buyout firm. Financial terms of the deal weren't
disclosed.
The investment is the latest in a busy summer in which dedicated
capital pools are taking direct stakes in well-established
private-equity firms, looking to profit from these firms'
management- and incentive-fee streams.
Dyal Capital Partners—a Neuberger Berman LLC unit and Goldman's
main competitor in making such minority-stake investments—in the
past two months took a less than 15% stake in midmarket buyout firm
H.I.G. Capital in a deal that valued the firm at $4.5 billion; and
a less than 10% interest in technology-focused private-equity firm
Silver Lake.
A person familiar with the situation told WSJ Pro Private Equity
in May that Goldman intends to make initial investments in
private-equity firms from Petershill II LP, a $1.5 billion
investment fund raised last year, mostly for hedge-fund manager
investments.
The person added Goldman has plans to raise a dedicated pool
focused on taking stakes in private-equity firms and deploying $1.5
billion for the strategy.
Within private equity, Goldman aims to build a diversified
portfolio of managers across sectors, strategies and geographies,
said the person, adding the firm will look at both midmarket and
larger fund managers.
Formed in 1996, Littlejohn, of Greenwich, Conn., has built a
track record buying and selling companies with $100 million to $800
million of annual revenue, making equity investments of $50 million
to $150 million, but the firm has kept a low profile compared with
many of its buyout peers.
According to Littlejohn investor Oregon Public Employees
Retirement Fund, Littlejohn Fund III LP, a 2005-vintage vehicle,
returned 2.37 times its capital as of Sept. 30 and posted an
internal rate of return of 25.4%.
The firm has since raised two other funds: Fund IV, a
2010-vintage vehicle with $1.34 billion of commitments, and its
latest fund, which closed at its $2 billion hard cap in 2014.
Littlejohn's credit business takes part in a broad spectrum of
investments, from secured term-loan obligations of
non-investment-grade corporate borrowers to debt and equity of
financially distressed companies.
All proceeds from the Goldman investment will be retained by
Littlejohn "and used for the continued growth of its core private
equity, special situations and performing credit strategies,"
according to the release. This eliminates investor concerns that
the freshly injected capital might only financially benefit
Littlejohn's founders.
Goldman said the investment follows a 17-year relationship
between Goldman's AIMS group and Littlejohn, adding that AIMS has
backed all of Littlejohn's committed capital private-equity
funds.
Goldman's AIMS group manages more than $150 billion in assets
across hedge-fund, private-equity, real estate and traditional
long-only managers through new fund commitments, secondary
investments, fund-of-fund investments, co-investments and
seed-capital investments.
Investment bank Barclays PLC and law firm Debevoise &
Plimpton LLP advised Littlejohn on the transaction.
(END) Dow Jones Newswires
August 17, 2016 18:05 ET (22:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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