On the Margin
Big Shake Shack investor raises $9.6B

Big Shake Shack investor raises $9.6B

This post is part of the On the Margin blog.

The success of last year’s Shake Shack Inc. IPO has been good for one of its big, early investors, Leonard Green & Partners, and not just because the private-equity group has been able to take in millions selling the stock.

The Los Angeles-based, private-equity firm this week said it raised $9.6 billion for its seventh investment fund.

That amount exceeded the firm’s target — which reportedly had been $7.5 billion. Leonard Green closed the fund at its cap of $9.1 billion from outside investors, while firm insiders invested another $500 million. That was also considerably larger than the $6.25 billion the firm raised back in 2012.

Success yields success, and inevitably the success of Leonard Green’s investments draw more investors eager for returns. The previous fund had a rate of return of more than 12 percent, according to Pitchbook.

LGP was founded in 1989 and invests in companies with “defensible competitive positions, attractive growth prospects and proven management teams." It invests in a number of businesses, including consumer and retail as well as healthcare, business and consumer services and distribution.

Indeed, the restaurant industry seems a small part of its portfolio, with Shake Shack and Union Square Hospitality Group — which gave birth to Shake Shack — among its listed investments.

Shake Shack has been a big win for LGP. While the stock remains well off from the stratospheric highs from after its January 2015 IPO, at $37.53 per share it is still more than double the $15 per share minimum the company targeted during the offering.

Private-equity groups have enjoyed successful fundraising rounds recently, and many are finding their funds oversubscribed. Roark Capital closed a $2.5 billion fund last year that beat its expectations. TSG Consumer Partners closed on a pair of funds of their own in November.

Private-equity groups in general have taken a great interest in the restaurant space in recent years, though more of them have been targeting smaller, high-growth concepts with early stage investments — much in the way that LGP put money into Shake Shack.

Correction: June 7, 2016 A previous version had the wrong month when TSG Consumer Partners closed on its fundraising last year.

Contact Jonathan Maze at [email protected]
Follow him on Twitter at @jonathanmaze

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