The
New York-based buyout firm, established in 2000 by former
PaineWebber bankers including Donald Marron after the investment
bank's acquisition by UBS Group, had earlier planned to raise
around $1.25 billion, well above the $950 million Fund IV that
Lightyear closed in 2017.
"Specialization means a differentiated story for investors, but
it also means better opportunities and significantly better
results because we understand the companies and the industry in
which we're participating," Lightyear Managing Partner Mark
Vassallo told Reuters.
A larger fund will allow Lightyear greater flexibility to invest
in companies with earnings before interest, taxes, depreciation
and amortization (EBITDA) of between $30 million and $40
million, up from the $10 million to $20 million range it
targeted with its third flagship fund, according to Managing
Director Stewart Gross.
Fund V is expected to be around 40% invested by the end of 2021.
Lightyear has already used the fund to make four investments and
is about to close a fifth deal, Gross added.
Investors have plowed money into private equity firms to secure
higher returns during a period of historically low interest
rates and readily-available cheap debt.
This huge pool of cash has pushed up valuations of companies
that private equity firms typically target, as well as
heightened competition for such assets.
To help combat this, Vassallo said Lightyear has been pursuing
thematic investing within financial services, including embedded
finance, where payments functions exist within non-financial
businesses such as healthcare platforms.
This allows Lightyear to not only make targeted investments in
the financial services sector, but also scout smaller,
disruptive startups that might emerge as competitors to existing
investments.
The tactic also identifies businesses which can be acquired
later to supplement an existing Lightyear investment.
(Reporting by David French in New York; Editing by David
Gregorio)
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