Gores nears $1.5bn final close for Fund III

The Alec Gores-led firm has collected just over $1bn for its latest special situations fund, which must close in August.

Gores Group, a Los Angeles-based firm, is nearing a final close on its third fund, having collected $1.04 billion out of its $1.5 billion target.

The firm has to hold a final close on the fund 12 months from the fund’s launch, which was in August 2009, according to documents from the San Diego County Employees’ Retirement Association. The pension committed $75 million to the fund at its meeting last week.

Gores closed its second fund on $1.3 billion in 2007. The firm raised $400 million for its first institutional fund in 2003.

Fund III has a 1.85 percent management fee during the five year investment period, and 1.5 percent of active investments after the investment period. The fund will also use 80 percent of transaction, break-up and other fees to pay down the management fee.

Alec Gores

Gores Group will look to make control investments in mid-market turnarounds, restructurings and distressed situations. The firm prefers to make investments in the form of common stock, preferred stock, convertible securities, mezzanine debt and/or senior debt.

Gores invests in North America and Europe, but expects much of Fund III to be invested in Europe. “Gores see sizable distress-related opportunities and less competition in Europe,” the firm said in documents. The firm has been building up its London staff over the past few years, and has committed about 28 percent of funds I and II to businesses based in Europe.

The firm uses “as much debt as is practical without putting undue financial pressure on the portfolio company; it typically uses a combination of asset-based debt as well as cash flow loans”.

Gores also doesn’t try to make exits through the public markets, but through “sales to strategic acquirers or through distributions after the companies have been returned to profitability”, the firm said.

Fund III will acquire 12 to 20 portfolio companies with investment sizes around $50 million to $250 million. Gores targets information technology, telecom, industrial, and to a lesser extent, media, healthcare and security businesses.

The firm is using Lazard as a placement agent for the fundraising.