L Catterton: Fund after fund after fund

Partners at L Catterton won’t get much breathing space in 2017. The consumer specialist, formed from Catterton Partners and L Capital, now has six fund families, and will launch Europe-focused and Asia-focused vehicles in the next 12 months.

Not that 2016 was a dull year – the merger took place in January. And it ended with a bang, as L Catterton’s North American buyout fund closed on its $2.75 billion hard-cap, about 60 percent larger than its predecessor. The hard-cap had been stretched from $2.5 billion due to strong demand from limited partners.

“We believe that $2.75 billion was the right size for our new Fund VIII,” Scott Dahnke, co-chief executive at L Catterton, tells Private Equity International. “If you look at Fund VII and the actual equity investments we deployed, it’s almost $3 billion including LP co-invest and we deployed it in about three years. We believe we can comfortably deploy the $2.75 billion and still offer meaningful co-invest to our LPs simply by adding one or two transactions to what we did in Fund VII.”

The firm made its first investment, in a pool and spa retailer alongside GIC, and is nearing a close on its second Latin America fund.

“As of January 2016, when the combination was announced, all six funds were to be raised within the next 12 to 18 months,” says Dahnke. The firm also closed its third North American growth fund, L Catterton Growth Partners III, on $615 million, $115 million dollars over target. The group also has a consumer real estate fund.

“Therefore, we felt like that was a good time to merge the two firms together because every LP who comes into our six funds circa 2017 will have been somebody who did it with full transparency on the unique benefits of the combined platform. The timing proved to be highly beneficial.”

“Not surprisingly, our market position attracted a lot of investors, at a minimum out of curiosity, but certainly increasingly so as they drilled more into the substance of what we have created and how that can benefit all stakeholders,” Dahnke adds.

Up to date performance data for the firm are hard to come by, but the 2006-vintage Catterton Partners VI had an IRR of 13.7 percent and a multiple of 1.9x as of 30 September 2015, according to the Pennsylvania Public School Employees’ Retirement System. Its annex fund Catterton VI B was as of 30 June 2016 returning an IRR of 22 percent and a multiple of 2.1x, according to the California Public Employees’ Retirement System. The firm declined to provide performance data.

Investors were indeed excited about the transaction with luxury group LVMH and chairman Bernard Arnault’s family holding company Groupe Arnault, recognising the global capabilities the firm now has.

“We believe that the global platform through their merger with LVMH will allow them to have a real edge as many consumer product companies are looking to expand globally,” said Daniel Cahill, a managing partner with Constitution Capital Partners. His firm, which has been an LP of Catterton’s for more than a decade, was pleased by the news of the merger and re-upped with the firm, committing $35 million to its buyout fund and $20 million to its growth fund in 2016.

Six fund programmes mean LPs can back the firm more than once, and L Catterton will hope investors want to ‘keep it in the family’ for a long time to come.