Kohlberg & Co targets $5bn for latest mid-market buyout fund

If the target is met, Fund X would easily be Kohlberg’s largest pool to date. It would be 47% larger than Fund IX, completed last year at $3.4bn.

Kohlberg & Co, launched 35 years ago by storied KKR co-founder Jerome Kohlberg, returned to the market with a 10th flagship offering.

The Mount Kisco, New York, private equity firm is seeking $5 billion for Kohlberg Investors X, materials prepared for Plymouth County Retirement Association said.

If the target is met, Fund X would easily be Kohlberg’s largest pool to date. It would be 47 percent larger than Fund IX, completed last year at $3.4 billion.

Fund X enters a tougher environment than the one faced by its predecessor. In the third quarter, 252 private equity vehicles secured $111 billion, according to preliminary Buyouts’ data, down 20 percent from three months earlier, marking the second consecutive quarterly dip in inflows this year.

The slower pace is measured in part by longer fundraising timelines. Kohlberg’s Fund X is expected to wrap up in the second half of 2023, PCRA documents said.

Kohlberg was founded in 1987 as the family office of the Kohlberg family. In 2001, it was reconstituted as an institutional manager after bringing in third-party capital for the $576 million Fund IV.

In 2007, the leadership of Kohlberg was transitioned to a new team, and is now led by managing partner Sam Frieder and CIO Gordon Woodward. Jerome Kohlberg died in 2015. His son, James Kohlberg, also a co-founder, today occupies the role of chairman.

Kohlberg’s strategy has from the beginning emphasized mid-market investing. It acquires control interests in North American companies with EBITDA of $25 million to $150 million operating in pharmaceutical and medical products and services, infrastructure services, financial and information services, business services, healthcare services, and food and consumer sectors.

Fund X will maintain this approach, making 15 to 17 platform investments, with equity checks ranging from $200 million to $600 million, PCRA materials said.

Since inception, Kohlberg has made 85 investments and more than 200 add-on acquisitions with an aggregate deal value of about $30 billion. The current portfolio holds 24 investments.

The most recent portfolio addition is United States Infrastructure Corp, a utility location services provider. The firm this year announced buying a 50 percent interest through a partnership with Partners Group, valuing USIC at $4.1 billion. The deal was a reinvestment for Kohlberg, which created the business in 2008 and sold it two years later to OMERS Private Equity.

Earlier deals include BluSky, a commercial restoration services provider, and Myers EPS, a provider of emergency lighting backup power technology, both backed in 2021. In the same year, Kohlberg closed an inaugural continuation vehicle with BlackRock, GIC and Lexington Partners for select Fund VII assets. Valued at $1.1 billion, the transaction was first reported by Buyouts.

Kohlberg Investors IX was performing strongly as of March, with a 1.3x net multiple and a 49.8 percent net IRR, according to PCRA documents. Fund VIII was generating a 1.7x net multiple and a 23.5 percent net IRR.

Frieder and Woodward oversee a team of 75 professionals. Senior members include 10 other partners, among them Jessica Hoffman Brennan, who was this year recruited from Onex as head of strategy and investor relations.

Kohlberg declined to provide a comment on this story.