Providence seeks $2bn for latest growth fund

Private equity firms have been coming back to market faster amid a strong fundraising environment, and Providence Strategic Growth (PSG) – an affiliate of Providence Equity Partners – is among them.

PSG is looking to raise $2 billion for its fourth fund, with an expected final close in March, according to documents from the Massachusetts Pension Reserves Investment Management Board’s February meeting. The group closed its predecessor on $1.3 billion in June last year.

Before Fund IV, PSG has raised funds at regular intervals of 18 months since inception in 2015, doubling the size each time. Fund II closed at $640 million in Dec 2016, and Fund I at $315 million in July 2015.

Providence-based PSG invests in North American lower mid-market traditional industries that are being reshaped by technological disruptions. It targets investments in information and education technology services companies that have not taken prior institutional capital. Fund IV will make 20 platform investments, investing between $5 million and $75 million in each.

PSG’s faster return to market was justified by the rapid deployment pace of its previous funds, said a limited partner that committed to Fund IV.

Fund IV’s terms are similar to its predecessors, according to a source familiar with the vehicle. Fund IV has a 10-year term, will charge a management fee of 2 percent and carried interest of 20 percent, and has a preferred rate of return of 8 percent.

PSG’s fourth fund was targeting a 25 percent internal rate of return, according to Texas Municipal Retirement System documents. Texas Municipal committed $50 million and Massachusetts Pension Reserves Investment Management Board committed $100 million to Fund IV.

PSG’s historical return bridge reflected gross multiple returns of 3.07x and net multiple returns of 2.37x, according to Texas Municipal documents.

PSG’s Fund III is already more than 90 percent committed, said a source familiar with the fund. In addition, PSG had invested heavily in its deal sourcing technology platform and executed around 170 add-on acquisitions across its funds, the source said.

Last year, the firm invested in ShootProof, an online gallery software provider; created Arcoro after acquiring ExakTime, which provides digital time and attendance solutions for construction and field services; and acquired BirdDogHR, provider of talent management solutions for construction, engineering and skilled trades industries. The firm also made several add-ons. In January, it offloaded YourCause to Blackbaud for $157 million.

PSG is led by Mark Hastings and Peter Wilde, and added Bill Aliber and Brian Shin as managing directors to its team last year.

The $40 billion Providence Equity focuses on media, entertainment, communications and information investments, and raised $2.2 billion for its eighth flagship fund in December.