Kohlberg hits $1.6bn hard-cap

The firm surpassed its $1.5bn target by attracting commitments from more than 50 limited partners, more than 20% of which are non-US investors.

Mid-market investor Kohlberg & Company has closed its Fund VII on its $1.6 billion hard-cap, bringing in a host of new investors and expanding its fundraising horizons around the world.

The firm launched Fund VII in 2011 with a $1.5 billion target and held a first close on $520 million that September. Kohlberg had collected about $945 million before holding a second close last May, a source with knowledge of the fundraising told Private Equity International in a previous interview. A $40 million commitment from the general partner was included in the second close.

Lazard acted as placement agent for Fund VII, which attracted commitments from more than 50 limited partners. About 70 percent of the capital in Fund VII came from existing investors, with the balance collected from the new LPs, said Shant Mardirossian, partner and chief financial officer at Kohlberg & Company. “We were pleased with the level of support we received from long-time existing investors. In addition, we were able to add a select group of premier new investors in the US and abroad.”

We wanted to diversify our LP base into new, growing markets, including Asia and Europe.

Shant Mardirossian

“We wanted to diversify our LP base into new, growing markets, including Asia and Europe,” Mardirossian said. “Expanding geographically was not only good for fundraising, but for the firm’s investments in general as Kohlberg has several portfolio companies with operations in Asia.”

Kohlberg Investors VII will target mid-market companies with enterprise values between $100 million and $750 million, providing equity capital investments of $50 million to $200 million. Fund VII’s strategy is similar to that of its predecessor, which raised $1.5 billion in 2007 and was generating a 16.85 percent net internal rate of return as of 30 June, 2012, according to documents from the Public Employee Retirement System of Idaho.

Fund VII is about 10 percent deployed in two investments so far, Mardirossian said. Kohlberg closed a $170 million investment in Aurora Products Group, a designer and manufacturer of burial products and accessories, in June 2012. The firm used about $70 million of equity in that deal, and last month completed a dividend recapitalisation that returned about half of the invested capital, Mardirossian said.

In August 2012, Kohlberg acquired Sabre Industries, a producer of engineered structures for electric infrastructure and wireless communications, for $310 million, using $75 million of equity and another $50 million in LP and lender co-investment, Mardirossian said.

Idaho made a $40 million re-up commitment to Kohlberg in 2011. Fund VII has also received commitments from the Teachers’ Retirement System of Louisiana, the State of Wisconsin Investment Board and the School Employees Retirement System of Ohio, according to Private Equity International's Research & Analytics division. Other investors include the Teacher Retirement System of Texas, AllState, MetLife, United Technologies and the Mellon Foundation.

Kohlberg was founded in 1987 by Jerome Kohlberg, who also co-founded Kohlberg Kravis Roberts. Kohlberg has raised more than $5 billion in commitments through its first seven funds and has completed around $9 billion in transactions.

Christopher Witkowsky contributed to this report.