ByHank Tucker,
Forbes Staff.
L
ittle more than one year ago, New York City’s Vestar Capital sent a surprising message to its limited partners. After decades of growth, it was scrapping plans for its eighth private equity fund and would instead focus on improving its existing portfolio of companies. Its most recent fund, Vestar Capital Partners VII, launched in 2018 with $1.1 billion but has been limping along with an internal rate of return of 7.7%, significantly lagging the S&P’s average return of 14% over the same period.
Vestar was born in 1988 during private equity’s first boom, the same year a brash NYC firm known as Kohlberg Kravis & Roberts took down mighty RJR Nabisco for $25 billion ($70 billion in today’s terms), back when deals were called LBOs and dealmakers were known as corporate raiders. A lot has changed since then. With more than 15,000 firms worldwide and $9 trillion in global assets, private equity is now mainstream. Vestar’s founders were bankers at First Boston who left to specialize in buying and selling companies like red plastic cup king Solo and Big Heart Pet Brands, known for Milk-Bones. One of their best deals: the $175 million purchase of Birds Eye Foods, sold in 2009 for $1.3 billion.
