(Adds background on fundraising environment in fifth paragraph. For more from Bloomberg’s private-equity newsletter, see BRIEF <GO>. )
Feb. 6 (Bloomberg) -- Providence Equity Partners Inc. is losing two managing directors, adding to at least three top departures last year, as the buyout firm struggles to raise a new fund less than half the size of its predecessor.
Jesse Du Bey and Nadim Nsouli are leaving the Providence, Rhode Island-based firm to pursue other opportunities, according to an investor letter, a copy of which was obtained by Bloomberg News. Providence last year parted with managing directors Mark Masiello and Gustavo Schwed, while Julie Richardson, who helped start the firm’s New York office, stepped back to become a senior adviser.
Providence, which oversees $27 billion, said it’s adjusting for “departures that often occur at the start of a new fund’s investment period,” according to the letter. The average tenure of managing directors at the firm is 12 years, according to a person familiar with the firm.
Providence, which started raising money in the first half of 2011, is looking to wrap up Providence Equity Partners VII LP by June after receiving a six-month extension to accommodate several investors. The firm has closed on about $4.5 billion and expects to finish at $5 billion, below its original $6 billion target, said the person, who asked not to be named because the information is private. Providence’s previous fund brought in $12.1 billion.
The firm is among a number of buyout firms that have sought smaller pools of capital than for prior funds as the capital- raising market has become more competitive and investors pare back their relationships with managers. KKR & Co. has been working to wrap up it latest main buyout fund at about half the size of its 2006 pool. Nordic Capital, a Swedish private-equity firm, is seeking 25 percent less than the 4 billion euros it initially targeted for its latest buyout fund, said two people with knowledge of the talks in October.
Providence is focusing more closely on industries that have driven past performance, such as media, communication and education, according to the letter, while stepping back from other areas. The firm is best known for deals including the 2007 buyout of Univision Communications Inc. and the cable-television network of the New York Yankees.
Andrew Cole, a spokesman at Sard Verbinnen & Co. based in New York, said he couldn’t comment on behalf of Providence.
Du Bey, a managing director in the firm’s New York office, is a director at several Providence portfolio companies including ikaSystems Corp., a provider of business process management technology to health insurers, and World Triathlon Corp.
Nsouli, who was a managing director in the firm’s London office, declined to comment on his departure and Du Bey didn’t return an e-mailed request for comment.
Masiello, a managing director in the firm’s Providence office and a director at several Providence portfolio companies, among them Freedom Communications and Univision Communications Inc., left last year, according to an investor.
Schwed, who made European investments out of the firm’s London office, decided to retire last year.
“I decided to retire after a 25 year career in private equity, a career I was fortunate to end at a great firm like Providence,” he said in an e-mailed statement.
Richardson last year stepped back to spend more time with her family, according to a person familiar with the situation. Richardson, who focused mostly on information services, was a director at Providence portfolio companies that included Altegrity Inc., SunGard Data Systems Inc. and SRA International Inc.
Masiello didn’t return calls for comment. Cole declined to comment on behalf of Richardson.
Providence has responded to recent departures by promoting Dany Rammal, a member of the London team, to managing director, according to the letter. Al Dobron, a managing director in the firm’s Providence office, will join the business development team to focus on investor-related matters. There are now 17 managing directors that lead the firm’s 56 person private-equity investment team, according to the letter.
Providence is also changing its investment committee to reflect its focus on media, communications and education with more emphasis on growth-oriented, smaller investments. The investment committee will now include the sector heads for media, communications, and education and information, Michael Dominguez, Alex Evans and Peter Wilde. Biswajit Subramanian, who represents the Asia team, will be part of the committee as well, according to the letter.
The four managing directors join a committee that includes Chief Executive Officer Jonathan Nelson, senior managing directors Glenn Creamer and Paul Salem and managing director John Hahn. Previously, managing directors held rotating two-year seats on the investment committee.
Investments that have helped drive performance in the firm’s prior fund from 2007 include Autotrader.com, New Asurion Corp., a provider of technology protection services and ZeniMax Media Inc., an interactive entertainment provider. Fund VI held eight investments below cost out of a portfolio of 36 as of year-end, including Univision Communications; ikaSystems; ITT Educational Services Inc., an online post-secondary education provider; and Altegrity.
Providence Equity Partners Fund VI, was producing an 8 percent internal rate of return and a 1.3 times multiple as of Sept. 30, according to an executive summary. The firm expects Providence VI to be up 1 percent from the third quarter when year-end valuations are finalized, according to the year-end letter.
Investments in Archipelago Learning, Kabel Deutschland and Mobileserv helped drive performance in the firm’s 2004 fund, according to the executive summary. That fund was producing a 5 percent IRR and 1.3 times multiple as of the end of September and is expected to be up 4 percent from Sept. 30 when year-end valuations come out. It held eight investments below cost at the end of the year, including Affinity Direct, an Internet marketing service company and Education Management Corp., a provider of private post-secondary education.
The firm has generated stronger returns in its $2.8 billion fund from 2000 compared to the two larger successor vehicles. Providence Equity Partners IV LP was generating a 39 percent IRR and 2.6 times multiple as of Sept. 30, according to the executive summary. The firm’s fund from 1998, Providence Equity Partners III LP, was producing a 21 percent IRR and 1.8 times multiple as of the same date.
Based on year-end estimates, Providence generated $2.9 billion of realized proceeds and $1.5 billion of gains, driven by investments in Archipelago Learning, AutoTrader, YES Network, Hulu and several others, according to the letter.
--Editors: Christian Baumgaertel, Sree Vidya Bhaktavatsalam, Josh Friedman