PEI 300 - The biggest private equity firms

Private equity firms focused on the consumer sector have had a challenging time over the years with innovation and technology disrupting the market as well as the well-publicised difficulties of the retail and casual dining sub-segments.

Two pure-play consumer specialists are swimming against the tide to climb up the PEI 300. New York’s Sycamore Partners (51) climbed 82 places from last year. The consumer and retail firm raised $8.5 billion over the past five years and is investing Sycamore Partners III, which closed above target on $4.75 billion in July 2018. Its portfolio includes US retailer Staples, department store Belk and pop culture icon Hot Topic.

San Francisco-based TSG Consumer Partners (69) is another outfit making impressive strides. The firm held a $4 billion final close in February on TSG8 and its parallel fund, which helped it shoot up 65 places. The firm, which has solely targeted consumer businesses since its launch in 1987, has raised $6.5 billion over the past five years.

TSG’s success can be attributed in part to its willingness to embrace the digital revolution; its current portfolio includes five e-commerce businesses, more than any other sub-segment except food and beverages, of which it owns six. The e-commerce portfolio includes German bicycle retailer Canyon and US fashion retailer REVOLVE, which deploys social media influencers to boost marketing.

“Gone are the days when a big marketing budget was a key driver, if not the key driver, of gaining market share,” Hadley Mullin, senior managing director at TSG, tells Private Equity International.

L Catterton (43), the world’s largest consumer-focused firm, has held steady in the top 50 in the last two years, though it slid 12 places this year. Its bespoke approach over the years includes a lot of research and pattern recognition, and “skating to where the puck is going”, according to Scott Dahnke, global co-chief executive.

The firm is deploying its 2016-vintage $2.75 billion global fund and seeking more than $2 billion for its fourth Europe fund, third Asia fund and its fourth growth equity fund, according to PEI data.

That many of these players are US-based is no coincidence: investor appetite for sector-focused funds such as consumer or retail is generally more muted in Europe than it is in the US. This is due to the geographical challenges of operating as a specialist in a pan-European context as well as the mixed performance of these funds, Janet Brooks, managing director for placement firm Monument Group, told PEI in February.

“Right now we see many European investors being particularly cautious in this area as a result of the turmoil in the retail space caused by the wholesale move from physical to digital together with fear of greater economic uncertainty and potentially lower consumer expenditure going forward,” she said.