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Providence reaches finish line on Fund VII

The Jonathan Nelson-led firm, which hit the $5bn mark as expected on its latest flagship vehicle, continues to raise capital for its third debt-related fund.

Providence Equity Partners has closed its seventh fund on $5 billion after a challenging fundraising campaign. 

Providence slashed Fund VII’s target from $6 billion to $5 billion. The firm also needed a fundraising period extension to get to its target, which it reached at the end of June, according to a person with knowledge of the firm. 

Providence declined to comment. 

The firm, led by Jonathan Nelson, collected $12 billion in 2007. That fund was generating a 4.6 percent internal rate of return and a 1.19x investment multiple as of 31 March, 2013, according to performance information from the Oregon Public Employees Retirement Fund

Jonathan
Nelson

Performance on Fund VI has improved over time, but limited partners who spoke with Private Equity International over the past year about the fundraising said the market believed Providence was a better performer with smaller funds. Fund VI was “too large for a media-focused fund,” one LP who declined to invest in Fund VII told PEI in a prior interview.

Some of the firm’s early funds have had extraordinary returns. Its second fund, which closed on $363 million in 1996, was generating a 3.32x multiple and a 78.5 percent IRR, according to Oregon. Its debut fund, which raised $171 million in 1991, was producing a 3.65x multiple and a 35.2 percent IRR, according to Oregon. 

While $5 billion is still a large haul, it is less than half of the size of the prior fund, which sources have pointed out would require Providence to cut down the size of its organisation. It’s not clear if the firm made a conscious decision to shrink, but several top executives have left the firm or stepped back recently. 

For example, Julie Richardson, a long-time Providence dealmaker, stepped back from day-to-day activities earlier this year. Richardson joined Providence in 2003. Meanwhile, Julie Fisher, the head of investor relations at Providence who one LP called the “face” of Providence’s LP client relationship, left this year. The firm hired former Goldman Sachs executive Renée Beaumont to lead its expanded multi-strategy global business development and IR effort across private equity and credit. 

Recently, Patrick Corso, a senior managing director, stepped down as head of Providence’s Hong Kong office. Corso was the latest in four departures from Providence’s Asia operations, according to a previous Reuters report. 

Though fundraising on Fund VII has finished, the firm remains in the market with other vehicles. Providence is expected to launch an RMB fund and the firm also is in the market with its third debt fund that is targeting up to $1 billion, according to a person with knowledge of the firm.

Meanwhile, Informa, an international publishing and events company, announced Friday it was selling five corporate training businesses to Providence for up to $180 million. Providence acquired sales training and consultant business Miller Heiman in January.