Kevin Dowd September 09, 2016
In the three-decade history of the modern private-equity industry, it’s hard to pick a more inconvenient time to close an $8 billion buyout fund than April 2007. That same month, subprime mortgage lender New Century Financial filed for bankruptcy, and later that summer a financial crisis began that enveloped the world economy. But Hellman & Friedman didn’t know any of what was to come that spring, when it finished raising capital for its sixth flagship fund—a vehicle that, at the time, was more than twice as large as any other buyout fund in the firm’s 20-year history.
Now, with nearly another decade gone and the vast majority of Hellman & Friedman Capital Partners VI invested, we can look back and get an idea of how the firm navigated a perilous time for private equity investing.
Using the PitchBook Platform, we’ll take a look at some of the fund’s key metrics and compare those to funds in its peer group. We’ll break down some of the limited partners who had the most skin in the game. And we’ll examine the deals Hellman & Friedman used its sixth fund to make, including a pair of billion-dollar buyouts that are still in the firm’s portfolio and a handful of big-ticket investments from which Hellman & Friedman has already exited.
(Data as of 1Q 2016)
Hellman & Friedman Capital Partners VI is one of nine US buyout funds of a 2006 vintage (the year of the fund's first investment) with more than $5 billion in their war chests. Here’s a screenshot straight from our platform of how the H&F vehicle compares to its peers:
As you can see, the vehicle ranks in the top quartile of its benchmark with an IRR of 12.93%, just about 5% better than the median of its peers. In terms of DPI, HFCP VI appears to be outpacing the competition by a wide margin with its 1.55x figure. For a more granular comparison, we can check out the benchmark’s full analytics:
Who are those limited partners who put their confidence (and their dollars) in Hellman & Friedman’s fund? The Platform tracks a mix of pension funds, fund-of-funds, insurance companies, foundations, sovereign wealth funds and government agencies.
The largest commitment comes from CalPERS, to the tune of $600 million. The Canada Pension Plan Investment Board contributed another $400 million, while the New York State Common Retirement Fund and the Washington State Investment Board each gave another $275 million. Together, those four LPs make up 18.5% of the fund’s total commitments.
Among the other big names to back Hellman & Friedman VI are the IBM Personal Pension Plan ($140 million), the Teacher Retirement System of Texas ($100 million) and the J. Paul Getty Trust ($35 million).
Much of the $8.4 billion in HFCP VI has been deployed in a half-dozen major buyouts, while the rest has gone to a panoply of smaller deals, most of them add-ons to larger platform companies.
Hellman & Friedman wasted no time after the fund’s closing in putting some capital to work in take-private buyouts, conducting a $1.8 billion deal for Kronos alongside JMI Equity in June 2007 and a $1.7 billion acquisition of Catalina Marketing that October. Catalina went on to become a popular add-on platform for Hellman & Friedman before the firm sold a majority stake in the digital media company to Berkshire Partners in 2014 in a deal valued at $2.5 billion. Kronos, meanwhile, is still a part of the Hellman & Friedman portfolio—although the firm did sell a $750 million minority stake to Blackstone and GIC in 2014 at a valuation of $4.5 billion.
Despite worldwide financial turmoil, Hellman & Friedman continued to find targets during 2008—and, in the years to come, continued to turn them around for a profit. The firm paid $1.8 billion to take Goodman Global private in February 2008 and sold the company four years later for $3.7 billion. In July 2008, Hellman & Friedman acquired Getty Images for about $2.4 billion before offloading the business to The Carlyle Group for $3.3 billion in 2012.
The consistent returns on such major transactions provide a blueprint for the strong returns Hellman & Friedman VI has provided to investors. Rather than pursuing astronomic profits on every buyout at the expense of risking whiffs, the firm has pursued a steady diet of deals with a high chance of providing good (if not always great) returns.
Up above, we looked at Hellman & Friedman VI’s IRR and TVPI, but how have those numbers changed over the life of the vehicle? Here’s a look at how some of the fund’s metrics have changed since 2007, via PitchBook Platform.
Here’s a breakdown of the fund's cash flow over time, which shows us the vehicle became profitable for investors sometime during 2014.
Still hungry for more on Hellman & Friedman Capital Partners VI? PitchBook Platform users can view everything about the fund right here. Interested in gaining access to this kind of data? Contact us today.