DLJ spin-out closes $2bn debut fund

Avista Capital – the firm founded by former DLJ head Thompson Dean along with other senior executives from CSFB’s private equity arm – has closed its first fund on $2 billion.

New York-based middle market firm Avista Capital has closed its debut fund on $2 billion (€1.5 billion), exceeding its initial target of $1.5 billion.

Public and corporate pensions, financial institutions, endowments, foundations, family offices and individuals are among the fund’s 60-some limited partners. Merrill Lynch was the fund’s placement agent.

Avista’s seven general partners are the fund’s largest investors, having committed $161 million.

That 8 percent GP commitment is “meaningfully larger” than the amount GPs would typically commit to a fund this size, said Thompson Dean, Avista’s co-founder, co-managing partner and chief executive officer. “I think it reflects a commitment to our own business,” he said.

Avista Capital Partners I will target US-based companies in the energy, healthcare and media sectors, and more than half of the fund has already been invested since its first close in April 2006 on roughly $500 million, Dean said.

“We’ve basically been investing the fund as we’ve been fundraising,” he said.

The firm has invested or committed approximately $1.1 billion in 14 companies. Recent deals include a $210 million investment in safety testing company BioReliance and its $530 million acquisition of media group The Star Tribune Company from The McClatchy Company.

“We’re on a roll,” Dean said, noting that Avista is set to complete $200 million in recapitlisations by month’s end, and an additional $300 million in recaps by the end of the year.

Dean, the former head of DLJ Merchant Banking Partners, the private equity arm of Credit Suisse First Boston, founded Avista in 2005 along with six other former senior DLJ partners. They spun-out approximately six months after CSFB announced restructuring plans for its private equity division.

Diamond Castle Holdings, another DLJ spin-out that targets many of the same sectors, closed its debut fund in December on $1.8 billion. The firm, which was founded in 2004 by former DLJ chairman Lawrence Schloss, had reportedly hoped to raise $2.5 billion.

Asked if there might be some friendly rivalry between the two, New York-based spin-outs, Dean said: “they’ve been out a lot longer than we have; they’re pursuing their strategy and we’re pursuing ours”.

Avista has offices in New York and Houston, Texas.