Thoma Cressey Raising Fund VII –

San Francisco – Thoma Cressey Equity Partners is in the process of raising Thoma Cressey Fund VII, scheduled to close in the first quarter of 2001. The $700 million-targeted fund will follow the firm’s pattern of investing in information technology services, health-care services and business services.

When asked about the fund’s stage focus, Thoma Cressey Partner Orlando Bravo, said that the fund’s investment style fits poorly into typical venture capital categories.

Bravo said the firm gets in at the formation stage of its portfolio companies.

“We form companies in partnership with management teams, and in that sense it’s as early as you can get,” Bravo said. However, he added, “to build companies we typically acquire expansion-stage businesses or out of favor companies.”

The investment team at Thoma Cressey identifies several companies operating in the same space that would work well together, or they might look for a potential “platform company” which would support additional acquisitions and growth. Bravo said the firm looks for situations where “the whole would be better than the sum of the parts.”

Bravo said the firm identifies management teams in which the partners have confidence. The firm depends on these teams to guide these newly-formed companies forward, and typically, the firm’s funding gives the management teams the resources to buy the individual platform companies and acquisition targets.

For example, Thoma Cressey backed the head of KPMG International’s communications practice, Joseph Bonocore, to form Eclipse Networks. Eclipse has bought three companies to build its corporate networks practice.

Bravo indicated the firm began raising Fund VII in July, and said that the group is definitely avoiding investments in the oil and gas, real estate and retail sectors.

Bravo said Thoma Cressey holds a portfolio company on average over five years. He said this had not really changed over the past few years, because he calls Thoma Cressey a value investor.

“We make our returns by building the company’s cash flow,” he said. “We’re fundamental investors.”

The other partners in the firm are Carl Thoma, Bryan Cressey, William Liebeck, Lee Mitchell, Bob Manning and Dave Mayer. Principals include Jeanne Plessinger and Chris Osborn.

Bravo said the general partners contributed $20 million to the new fund.

Public and private pension funds, are lining up to support Fund VII. Bravo said most previous limited partners are interested in Fund VII but declined to comment on exactly who the fund’s LPs are. The Massachusetts Pension Reserves Investment Management Board and the Minnesota State Board of Investment have publicly filed their intentions to invest in the firm since the firm began raising the fund.

As previous LPs, the firm publicly identifies pension plans associated with the state of California, AT&T Corp., Bell Atlantic and United Airlines Inc. The firm also claims as past investors endowments associated with the following groups: the University of Chicago, Northwestern University, the John D. and Catherine T. MacArthur Foundation and the Rockefeller Foundation.