Kevin Dowd January 31, 2017
Since the start of 2000, only the merest number of buyout funds worldwide—fewer than 10—have posted a TVPI higher than 4x, according to the PitchBook Platform. That’s out of nearly 4,500 total vehicles. And of those few to top the 4x mark, only one vehicle has been larger than $500 million: Cortec Group Fund V, which closed on $620 million in 2011.
So how did Cortec Group deliver the best investment multiple for a fund its size of any private equity firm in the past 16 years?
The answer is a woolly one.
There are good investments. There are home run deals. And then there’s Cortec’s 2012 acquisition of a reported two-thirds stake in Yeti Coolers for $67 million, the first platform purchase out of the firm's Fund V. With Yeti eyeing an IPO on the NYSE sometime this year that could value the company as highly as $5 billion, according to The Wall Street Journal, Cortec’s paper profits may reach as high as $3.3 billion—representing a jaw-dropping 50x return on investment.
Founded in 2006 in Austin, TX, Yeti has turned into a minor phenomenon the old-fashioned way: By making products its consumers seem to greatly enjoy. From stainless-steel mugs to jumbo hunting coolers, its offerings run the gamut of products designed to keep things hot or cold. Between 2013 and 2015, the company’s net sales climbed from about $90 million to about $470 million, while net income swelled from $7.3 million to $74.2 million.
Cortec already extracted one hefty dividend—some $312 million—from Yeti last May, and the New York-based firm should be nearing a partial exit: The company filed for IPO last July but has continued to push back its actual offering, with the WSJ reporting that Yeti may be seeking more private funding. Cortec will maintain a majority ownership stake in the company once it goes public, according to an SEC filing.
The other investments made with Cortec’s fifth fund have been far less flashy. Mainly ranging across the healthcare and household products sectors, they include buyouts of companies like veterinary hospital manager Community Veterinary Partners and specialty cleaning products business Weiman Products, as well as smaller add-on deals for brands like OOPS! Paint Remover and Goo Gone.
For the first few years after launch, Cortec Group Fund V posted relatively normal returns. Around 2014, though, as the runaway nature of Yeti’s success became clear, its multiples began to skyrocket. Here’s a full look at the progression of its IRR, DPI, RVPI and TVPI, straight from the PitchBook Platform:
And if fundraising feedback is any indication, LPs have taken note of Cortec's brilliant success. The firm closed its sixth buyout fund in May 2015 on $1.1 billion, nearly doubling the size of its stellar Fund V.