KPS Races to $7 Billion, 30% Carry

After just four weeks of fundraising, KPS Capital Partners has held a first, final, hard cap and oversubscribed closing of KPS Special Situations Fund V LP and KPS Mid-Cap Fund LP. KPS Fund V had a $5 billion target and a $6 billion hard cap, and KPS Mid-Cap had a $750 million target and a $1 billion hard cap.

KPS Capital Partners makes control investments in manufacturing and industrial companies across a range of industries, including basic materials, branded consumer, healthcare, automotive parts, capital equipment and general manufacturing. Many of KPS’ investments involve creating new companies to buy underperforming or distressed assets, companies operating in bankruptcy or in default of obligations to creditors, or with a history of recurring operating losses. Both new funds may invest anywhere in the world but KPS has generally invested in companies headquartered in the United States, Canada and Europe. In addition to its New York headquarters, KPS has offices in Frankfurt and Amsterdam.

KPS received more than $15 billion of total demand for the two funds which was raised with unprecedented speed – four weeks. The fundraising launched on September 4, 2019 with the distribution of PPMs and the deadline to submit subscription books was October 4, 2019, with the remainder of the period largely devoted to allowing Kirkland & Ellis, counsel to KPS, to mechanically close the funds.

KPS Fund V and KPS Mid-Cap both have a true 30% carried interest (not a tiered 30% carried interest) and a 1.25% management fee, which is lower than most other funds and, according to KPS, reflects “the firm’s desire to align its interests fully with its limited partners and generate value by focusing on delivering strong investment returns.”

Limited partners in both new funds are from over 25 countries. “We are humbled by the demand from the global investment community for KPS Fund V and KPS Mid-Cap,” said Michael Psaros and David Shapiro, co-founders and managing partners of KPS, in a released statement. “We are grateful for the trust and support in our firm by many of the world’s leading institutional investors. The success of this fundraise demonstrates the close relationships we have established with our limited partners over decades. We welcome many new investors from around the world and are pleased to have the continued support of our returning limited partners.”

KP Fund V and KPS Mid-Cap, with a combined $7 billion in capital commitments, will both make control investments in complex corporate carve-outs, turnarounds, restructurings, bankruptcies and other special situations. The KPS Fund V team is led by co-managing partners Michael Psaros, David Shapiro, and Raquel Palmer; and partners Jay Bernstein, Ryan Baker and Kyle Mumford.

KPS Mid-Cap will make investments in the lower end of the middle market that require up to $100 million of initial equity capital. The KPS Mid-Cap team is led by partners Pierre de Villeméjane and Ryan Harrison.

“We are excited to launch our Mid-Cap investment franchise today with this fund closing. KPS Mid-Cap will enable us to pursue attractive investment opportunities that we have not been able to capitalize on due to size as our flagship funds have grown,” said Ms. Palmer. “We were tremendously successful in this market in the past and are excited to return, now with our entire firm’s material resources and global platform. KPS Mid-Cap will enjoy a significant competitive advantage in this market by leveraging the scale and experience of the larger KPS family.” KPS’ portfolio companies have total annual revenues of approximately $9.6 billion, operate 149 manufacturing facilities in 28 countries, and have approximately 35,000 employees.

Kirkland & Ellis provided legal services to both KPS Fund V and KPS Mid-Cap on this fundraise.

© 2019 Private Equity Professional | October 21, 2019

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