FFL Beats Goal for Fund IV; Garners Over $2B

San Francisco–based middle-market PE firm FFL completed fundraising for FFL Capital Partners IV, with commitments of $500M more than it was seeking.

San Francisco–based middle-market private equity firm FFL Capital Partners completed fundraising for its FFL Capital Partners IV fund in early June, raising over $2B—well above its $1.5B target.

The fund was raised with a mix of domestic and international institutional investors, including some of the largest existing investors in FFL’s third fund, a fact that its partners are extremely proud of. “We have very good relationships with our LPs,” says Spencer Fleischer, co-CEO and president of FFL. “We work for them, and we’re very transparent. It’s natural and very satisfying to have long-term supporters.”

FFL portfolio companies—in business services, consumer, financial services, and healthcare services—are located across all geographies in the U.S., and the firm adds value in many different ways.

“The first part would be strategy,” says Fleischer. “Sometimes we can help companies step back and take a longer-term view and invest perhaps more aggressively than they would have as entrepreneurial companies, because we have capital and we tend to think strategically. Sometimes the value added is in very specific process improvements.” As examples of areas where FFL will have people go in and help with specific activities, he mentions the way the sales force is managed or the sales territories are carved up, implementing a new IT system, improving the systematic process of product development, or making purchasing more efficient.

FFL also has transactional experts to add value with M&A and financing, as well as an operating partner in charge of human capital that has a track record of recruiting C-suite-level hires to be appointed to portfolio companies if needed.

In addition to transparency, which Fleischer says has led to several long-term relationships with LPs, FFL’s focus on midmarket deals has remained consistent throughout the firm’s tenure, despite its ability to raise more and more money.

“We are resolutely a middle-market firm,” he says. “As our funds have gotten bigger, we’ve done more deals per fund. And we want to stay where we think there’s good opportunity and where we can add value.”

Since the market has remained strong, multiples are higher than usual, but Fleischer says that doesn’t mean FFL will put the extra money raised in Fund IV into any irrational buying.

“We have to try and find companies where we think we can do something to improve the performance of the company—either on the top line or in the margins—that makes a high multiple worth paying if we pay it,” he says. “Or we have to find deal circumstances where the investment thesis is less obvious, more complicated, and the multiples aren’t driven so high by leverage.”

And while fundraising can take on many life forms in the 21^st century, for FFL it’s the message that’s changed, not the method.

“When we started, we were talking about what we were going to do,” says Fleischer. “Now we can talk about what we’ve been doing.”