Apax scraps deal-by-deal carry for Fund IX – Exclusive

The buyout house is no longer offering LPs the choice to opt into a deal-by-deal style waterfall in a portion of its latest fund.

Apax Partners has taken the offer of opting into a deal-by-deal style waterfall in its latest flagship fund off the table, Private Equity International has learned.

Prior to the fund’s launch, PEI reported that Apax Fund IX would offer LPs the choice between deal-by-deal carry distribution and the European model, in which carry is not distributed until all drawn down capital is repaid to investors and the preferred return is met.

The fund, which had an initial target of $7.5 billion, has already amassed commitments of $7.9 billion, and has set a hard-cap of $9 billion. Around $2 billion of the fund’s committed capital was set to be allocated to the deal-by-deal structure, which LPs would be offered on a first-come, first-served basis.

That option is no longer being offered to limited partners, according to a source with knowledge of the fundraising.

Apax declined to comment.

The firm chose to offer deal-by-deal carry in order to better compensate and retain junior level talent, a source familiar with the fundraise told PEI in December. The carry earned through the deal-by-deal portion of the fund would not be available to Apax’s equity partners, as reported by PEI.

Investors in Fund IX include Kansas Public Employees Retirement System, Minnesota State Board of Investment, Virginia Retirement System, and Washington State Investment Board, according to PEI Research & Analytics.

Apax is not the only firm that has offered its investors this choice for its latest round of fundraising. For its seventh flagship fund, which closed considerably above its €5.25 billion target on €6.75 billion last August, Northern Europe-focused EQT Partners offered investors a management fee discount if they opted for deal-by-deal carry.

According to a source familiar with the fundraise, the majority of EQT VII investors accepted the offer, as reported by PEI.