Marlin may far exceed $1bn

Marlin Equity Partners is targeting $1 billion for its fourth fund and will likely exceed that amount as the fund appears to be well oversubscribed, according to three sources who have seen the fund offering. 

“The chances of getting in are pretty slim,” said one LP considering making a commitment to the fund.

Marlin’s target is $1 billion, but the firm could raise as much as $1.5 billion or more, according to another potential LP. The potential LP said Fund IV does not have a hard-cap, though that could not be officially verified with the firm. Marlin did not return several requests for comment. 

Update: Marlin has filed documents with the US Securities and Exchange Commission listing its target at $1.6 billion, higher than what was reported on earlier pitchbooks.

The lack of a hard-cap would mean Marlin could conceivably raise as much as possible, the LP said. “Expect them to raise more than $1 billion and perhaps something close to $2 billion,” according to the LP. 

The chances of getting in are pretty slim. Potential LP

Fund IV has only been on the market for a short while; one LP received a Fund IV pitch book in mid-February. A quick close would extend the firm’s streak of lightning-quick fundraisings – Marlin took less than three months to close its third fund on $650 million in 2009, and took about the same time to close its second fund on $300 million in 2007. Fund II and III were marketed by Probitas Partners, though that firm is not working on Fund IV and it’s not clear if Marlin is using a different placement agency. 

The firm, formed in 2005 by former Gores Technology Group executive David McGovern, will charge a 2 percent management fee and 20 percent carried interest on the fund, according to a LP citing fund documents. Marlin will contribute 80 percent of any transaction fees to offset the management fee, which the LP said was a bit low. “That should be 100 percent,” the LP said. 

Marlin will inject $30 million into the fund for its GP commitment, the LP said. 

The firm’s performance so far has been stellar. The debut fund, which reportedly raised $64 million in 2005, produced a net 2.8x multiple and a 45 percent internal rate of return, the LP said, citing fund documents. Fund II generated a net 2.4x multiple and a 35.7 percent IRR, and Fund III, which began investing in 2010, has been putting up early numbers of a net 1.1x multiple and a 12.4 percent IRR, the LP said. 

However, a few LPs told Private Equity International they were curious to see how Marlin would fare adjusting its investment pace to the much larger pool of capital. The firm jumped from $300 million to potentially more than $1 billion in about five years, which several LPs characterised as very fast. 

Still, with its excellent track record, many investors are scrambling to get into Fund IV, and most LPs will give Marlin the benefit of the doubt, one LP said. 

Marlin focuses on corporate divestitures, turnarounds, growth equity and buy-and-build strategies, and targets investments in sectors including healthcare, technology, consumer, services and manufacturing. Earlier this year, the firm bought the optical networking business of Sycamore Networks.