New Mountain Capital Looks to Diversify with New $1B Fund

Steve Klinsky won’t be rushed. He won’t contemplate, consider or commit to a course of action until he’s certain it’s right. As founder and CEO of New Mountain Capital, he has a keen eye for investment opportunities but the secret to his company’s success doesn’t belong to the hard-driving, deal-making celeb-execs that stalk Wall Street. It belongs to the careful, contemplative individual with the intellectual stamina to dive deeply into the data and appreciate all the angles of the firm’s chosen investment industry.

Become a Subscriber

Please purchase a subscription to continue reading this article.

Subscribe Now

If given a choice between a deal-closer and a diligent researcher, Klinksy is going to go with the researcher every time. “By research, I don’t mean sitting in a library,” he said in a 2006 interview. “I mean really being able to understand companies fundamentally and in a very deep way. That comes ahead of deal-doing.”

Founded in 1999, the New York-based business earned an early convert in the California Public Employees’ Retirement System. Attracted by Klinsky’s reputation, the pension giant backed his first fund and purchased a small piece of the $770 million he raised. Nowadays, the company is looking to diversify their base and is reportedly in talks with investors about putting together a $1 billion-dollar fund to buy minority stakes in small to mid-sized American companies.

In 2017, private equity firm Blackstone Group LP partnered with New Mountain to acquire Alight Solutions, a benefits management company, from Aon Hewitt. After little more than two years, Blackstone is working on their exit strategy. They recently announced an IPO for Alight and are looking to offload controlling interest either through stocks sold or an acquisition.

The IPO announcement raised some eyebrows in the investment community as the company holds $3.4 billion in long term debt that it can’t afford to pay-off. In addition, a portion of the IPO proceeds has been earmarked for debt payment. The fate of Alight is in the air and New Mountain’s minority stake may mean leaner profits than originally projected.

New Mountain Capital is an alternative investment management company with private equity, public equity and private credit strategies. Their private equity unit generally acquires only three to four companies each year. They choose businesses in “defensive growth” sectors and works at cultivating their portfolio companies into successful leaders of their industries.

New Mountain Credit represents their private credit interests and uses the firm’s “defensive growth” investment philosophy to decide on credit investment opportunities. Established in 2008, the credit division focuses on the U.S. middle market and they currently manage $4.4 billion in assets.

Their public equity unit, New Mountain Vantage, look to purchase non-control positions in publicly traded companies in areas of interest to the company. With aggregate assets in excess of $20 billion across all business units, they rely on rigorous fundamental research and focus on growth as opposed to falling back on excessive risk as a tactic for achieving high returns.