<img height="1" width="1" style="display:none;" alt="" src="https://px.ads.linkedin.com/collect/?pid=2810433&amp;fmt=gif">

Thought. Leadership.

Innovations, investments, strategies and opportunities introduced at the speed of business.

Thoma Bravo raises $1.25B for Fund X

In the latest sign that institutional investors haven’t lost interest in private equity, Thoma Bravo LLC said Tuesday, Feb. 28, that it wrapped up its 10th fund with $1.25 billion in capital commitments, the firm’s largest vehicle yet.

The firm, which has offices in San Francisco and Chicago, said the fund was “substantially” oversubscribed. It exceeded the $822.5 million predecessor fund raised in 2009.

Carl Thoma, who co-founded the firm more than 30 years ago, said limited partners, such as pension funds and endowments, are looking to invest in midmarket funds instead of much larger vehicles, and his firm has benefited from that.

“Seven, eight years ago, all these funds that raised up to $20 billion had done a good job convincing investors they could get a better return than middle market,” Thoma told The Deal Pipeline.

Since the buyout boom years, he said, “Some of their investments didn’t do as well as they expected. The middle market is just putting up some better numbers. Those things happen.”

Because distributions have declined and with a large overhang of uninvested capital, the LPs have been reducing the size of commitments particularly to bigger funds, and putting their money into the middle market.

For example, while a limited partner might have invested $500 million in a large PE fund during the boom, it now will invest $300 million in a bigger fund and $200 million to a midsized fund, Thoma said.

Notwithstanding the barrage of negative reports that private equity and some of its high-profile titans have drawn amid the Republican primary, LPs still rely on the alternative asset class as a stable investment class with return expectations that they deem superior to public equities.

London industry tracker Preqin Ltd. said in a recently published report that out of 100 LPs that it surveyed, 73% plan to make new investments in 2012, most of which would come in the first half of the year. In 2011, 66% of its survey respondents made new fund commitments, up from 58% in 2010.

Thoma Bravo’s existing investors participated in the new fund, though Thoma declined to identify any of them. He said two new pension plans also joined.

Thoma began his investment career in 1974 at First Chicago Investment Corp. He co-founded Golder, Thoma, Cressey Rauner Inc. in 1980. That firm eventually split into GTCR Golder Rauner LLC and Thoma Cressey Bravo in 1998. Thoma Cressey Bravo became Thoma Bravo in 2007, when Bryan Cressey left to raise a separate fund.

Thoma’s nine prior funds booked a compounded 25% average rate of return, Thoma said.

Recent investments include the buyout of Portland, Ore.-based Tripwire Inc. in May, whose value was estimated at $100 million, and the $1.3 billion leveraged buyout of Blue Coat Systems Inc. in December. The fund’s first platform acquisition was Telestream Inc., a provider of live and on-demand digital video systems.

Thoma agreed that the private equity industry has suffered from negative publicity over the years, but he also deflected some of the criticism.

“I think our whole industry has suffered a lot of damage to the asset class by certain people throwing lavish parties,” Thoma said. “We should be looked at how successful our companies are. Sure they might lay some people off when we initially buy a business. But from when we buy it to when we sell it, we’re creating jobs.”

A Kirkland & Ellis LLP’s team including partners Bruce Ettelson and John Muno as well as associates Adam Burns and Shimrit Scher represented Thoma on the fund. Tax partner William Welke also assisted on the fund formation.