• Fund V hit USD 3.975bn hard cap with subscriptions comfortably outstripping capacity
• Once North America-centric LP base now an equal split with Europe, Middle East, Asia
• Tech services a key area of focus within business services, healthcare, industrials remit

Strong international LP appetite and a steady flow of distributions helped Ridgemont Equity Partners close its fifth buyout fund at the hard cap of USD 3.975bn – with subscriptions outstripping capacity threefold.

Having previously relied heavily on North America-based LPs, Ridgemont engineered a roughly even split between that geography and rest of world in Fund V. It was helped by placement agent Evercore. The largest rest-of-world contribution came from Western Europe, followed by the Middle East and Asia.

“We’ve spent more time cultivating relationships in Western Europe over the past few years,” Jack Purcell, a managing director at the Charlotte-based firm, told Mergermarket. “The Middle East and Asia are newer markets for us, and we expect them to grow meaningfully over time.”

Ridgemont, formed through a spinout from Bank of America in 2010, recorded an over 100% re-up rate from existing LPs in terms of net dollar retention. There was also a GP commitment of nearly USD 250m, making the team one of the largest investors in Fund V alongside pension funds, sovereign wealth funds, insurance companies, endowments, foundations, and family offices.

Purcell noted that a large GP commitment – it works out at 6.3%, whereas the global average is around 3%, according to Investec’s 2024 Private Equity Trends report – has been a hallmark of each of Ridgemont’s funds. It ranks among the top three investors in each fund. “Alignment via the GP commitment and the cohesion of the partnership helped us to stand out,” he said.

Realizing returns

Ridgemont’s above-average distributions are cited by Purcell as another key factor.

“What stood out to me is that DPI is the new IRR,” Purcell added. “Returning cash to investors was a major focus.”

The firm’s first three funds had generated net distributions to paid-in (DPI) of 2.6x, 1.6x, and 0.9x as of March 2025, according to meeting materials from the City of Quincy Retirement System. Funds I and II are both nearing full realization. Fund III, which closed on USD 1.65bn in 2018, had realized six of its 20 investments as of March with a realized net multiple of invested capital (MOIC) of 2.9x and an overall net MOIC of 1.9x. Net IRR was marked at 25%.

Since then, exit activity includes the majority recapitalization of HealthMark Group, a provider of software and services for medical records management, by TA Associates in July, with Ridgemont maintaining a significant equity stake.

The sponsor has other exits in the near-term pipeline. “We expect several more to occur over the next quarter or two,” said Purcell. “The flywheel continues to turn in a productive way.”

This may involve early monetization from Fund IV, he added. As previously reported, the firm’s main focus has been on generating exits from Funds II and III.

Fund IV, which closed on USD 2.35bn in 2022, was 65% committed across nine investments as of March, the City of Quincy materials show. Net MOIC and IRR were 1.1x and 11%.

According to Purcell, the fund is on track to wrap up in 2026, in line with the firm’s typical four-year deployment schedule. There is enough dry powder for a few more investments.

Consistent focus

Fund V will not stray from Ridgemont’s focus on business services, healthcare, and industrials. “This is not a market to be an industry tourist,” said Purcell.

The firm prefers asset-light services and distribution businesses across these three core sectors. As previously reported, healthcare services companies are considered an attractive opportunity in the current environment, while exposure to US infrastructure upgrades is a prominent theme within industrial services.

Purcell highlighted technology services as another growing opportunity, specifically service-oriented businesses that help small and medium-sized enterprises upgrade their technology and infrastructure. “There’s a large number of privately held companies in the US that need support in this area,” he said.

Ridgemont has already invested in this area from Fund IV, recapitalizing smartShift in 2023 and investing in digital engineering services business Unosquare in June this year.

The firm typically spends several years building relationships with prospective targets with a view to buying controlling stakes of 60%-70%. Founders roll over significant minority interests.

After a turbulent start to the year, sentiment in the broader M&A market is showing signs of recovery, with many sale processes launching as anticipated in the post-Labor Day window, as Mergermarket has reported. Nevertheless, the market remains bifurcated. While top-tier assets continue to attract strong demand and premium valuations, others often struggle to gain traction.

“Activity has picked up, but the challenge is that quality varies widely,” said Purcell.