Low-leverage New Mountain raises $5.1bn Fund III

The New York firm led by Steven Klinsky saw huge demand from LPs who amid the credit crunch ‘like our style on a relative basis more than ever’.

New Mountain Capital, a New York private equity firm, has closed its third fund with total commitments of slightly more than $5.1 billion (€3.32 billion), according to the firm’s founder Steven Klinsky.

New Mountain, winner of the Private Equity International Award 2007 for US mid-market firm of the year, raised $1.55 bilion for its last fund, which closed in 2004.

The new fund began fundraising last summer with a target of $3 billion. Credit Suisse acted as placement agent for the vehicle.

Klinsky attributed the success of the fundraising to his firm’s track record and specifically to the performance of its portfolio investments through recessions and market turmoil. The firm pursues growth investments in “defensive” sectors, such as education and healthcare.

In addition, New Mountain’s investment style, compared with that of many other middle-market private equity firms, tends to employ lower levels of leverage in deals. Of the first 13 deals done by the firm, founded in 1999, nine were equity-only, and the rest had debt multiples of no greater than 4-times EBITDA.

Klinsky said his firm’s style can be viewed as working well in a tight debt market and through economic downturns. “People like our style on a relative basis more than ever,” he told PEO.

Of the five portfolio companies acquired by New Mountain’s second fund, three have already gone public. These include Deltek, a provider of IT services, and reinsurance platforms Paris Re and Validus Holdings.
New Mountain now has 32 investment professionals. It was founded in 1999 by Klinsky, who left private equity firm Forstmann Little shortly before the firm began a downward spiral thanks to two disastrous telecommunications investments. Other senior partners in the firm include Robert Grusky and David Wargo.

The California Public Employees’ Retirement System was an early and big backer of New Mountain Capital. The pension committed $400 million to the new New Mountain private equity fund, and a total of $250 million to the two prior funds.