By Dan Primack
September 20, 2010

Hellman & Friedman this morning announced that it has agreed to buy Internet Brands, the online publisher that began life 12 years ago as Idealab-backed CarsDirect.com. I plan to delve deeper into the actual deal later today, but right now just a quick note on Hellman & Friedman’s participation:

It would appear that H&F will do this deal out of its sixth fund, an $8.4 billion vehicle closed in 2006, rather than the $8.8 billion pool raised in late 2009. In fact, the firm still hasn’t spent a dime of that new money. For the uninitiated, it is very unusual for private equity firms to sit on new funds for more than a year …

The explanation here comes from an investor in both Funds VI and VII. He reminds us that H&F was very close to buying Neuberger Berman in late 2008, which would have “sucked down a lot of Fund VI.” H&F bailed out of that deal a few months later, thanks to an out tied to S&P 500 performance. By that time, however, it had already committed itself to raising new capital.

“They were very open about the timing starting Fund VII during the process,” says the investor.

According to data from CalPERS, H&F VI was only around 70% called through the end of Q1. That would mean around $2.52 billion left in dry powder. (Yes, I’m ignoring the possibility that CalPERS’ cash-in figure includes annual management fees.)  Since then, it has announced three deals: Internet Brands ($640 million), Associated Materials ($1.3 billion) and Sedgwick Claims Management Services Inc. ($1.1 billion, together with Stone Point Capital).

Let’s assume that each of those deals included a 40% equity check from H&F (or 20% in the case of SCMS, because the equity was syndicated). That would mean around $776 million in new equity commitments, bringing the remaining dry powder to around $1.75 billion.

The firm probably wants to hold onto at least $750 million for follow-ons or other special situations, which means there is about $1 billion to go. Sounds to me like Fund VII won’t see its first deal until at least the first quarter of 2011, or 15 months after it closed. Guess this was the mega-fund to invest in if you were having liquidity troubles …

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