CD&R promotes four to partner – Exclusive

The New York-based firm has promoted four principals to partner, following an operating team expansion throughout 2016.

Clayton, Dubilier & Rice (CDR) has promoted four principals to partner, Private Equity International has learned.

Sarah Kim, Stephen Shapiro, Derek Strum and JL Zrebiec, who altogether cover CDR's four core sectors of consumer and retail, healthcare, industrials, and services, were promoted to partner.

Kim joined the New York-based firm in 2008 and focuses on healthcare investments. She has participated in the firm's investments in companies like veterinary prescription management software platform Vets First Choice. Before joining CDR, Kim was at private equity firms Metalmark Capital in New York and McCown De Leeuw in California, and at Goldman Sachs, according to the firm's website .

Shapiro came to CDR in 2002 and works on the services sector. He has been involved with the investment process for companies like industrial and specialty chemicals distributor Univar. Before CDR, he worked in investment banking at Merrill Lynch and investing at Perry Capital, the firm's website indicated.

Before joining CDR in 2003, Strum was at Morgan Stanley and York Capital Management. He focuses on healthcare, and has had a hand in investments such as medical apparatus manufacturer Drive DeVilbiss Healthcare , according to the CDR website.

Zrebiec worked at Goldman Sachs before joining CDR in 2004. At CDR, he focuses on industrials and has played a role in investments in roofing supplies wholesaler Roofing Supply Group, among other deals.

These promotions follow CDR's expansion of its operating team. In 2016 the firm named Russ Fradin, formerly the chief executive officer at SunGard Data Systems, as an operating partner. CDR also appointed four other people as operating advisors: Helge Lund, former CEO of BG Group as well as Statoil;  Jim McNerney , former CEO and chairman of The Boeing Company; Nitin Sahney, former chairman and CEO of Omnicare; and David Scheible , former president and CEO of Graphic Packaging International.

CDR declined to comment.

Reuters first reported last week that CDR has raised $6 billion for its 10th fund, Clayton Dubilier & Rice X, which is targeting $8.5 billion. The fund is expected to hit its approximate hard-cap of $9.4 billion in the first quarter, Reuters reported.

A source familiar with the matter told PEI that CDR is working on a final close right now, anticipating to hit the hard-cap despite a $20 billion demand.

The demand comes from CDR's successful track record, including a 27 percent net internal rate of return for Fund VIII and a 23 percent net IRR for Fund IX, according to the source. Also, the firm has returned $19 billion in distributions in the past five years to its LPs, the person said.

The person added that Fund X has an 8 percent hurdle rate, 100 percent fee offset, and a management fee of 1.5 percent, with about 5 percent of the fund coming internally as the general partner commitment.

CDR's average acquisition multiple for the 10 partnership deals it executed in the last five years was less than 8x EBITDA, below the mid-market average of around 11x EBITDA paid amid a high-valuation environment, as reported by PEI .

The firm's average equity check is between $350 million and $500 million, the person said, adding that the size isn't likely to change with Fund X.