Elevation Hopes To Buy Additional Time For Debut Fund

   By Laura Kreutzer and Daniel Hausmann 
   Of DOW JONES LBO WIRE 
 

The clock is ticking for Elevation Partners LLC's debut fund, but the media and entertainment buyout firm is hoping for a reprieve.

Elevation, a high-profile firm co-founded by Roger McNamee and U2's Bono, among others, has asked its backers for a one-year extension on the investment period of Elevation Partners LP, a $1.9 billion debut fund raised in 2005, LBO Wire has learned.

The debut fund's investment period ends this August, but the Menlo Park,Calif., firm still has about $200 million in capital to deploy, several of Elevation's investors said.

At press time, Managing Director Kevin Albert, Elevation's head of investor relations, couldn't be reached for comment.

The firm wants its limited partners to sign off on the extension by mid-July and has proposed some concessions on management fees in exchange for the additional time, these LPs said. They wouldn't provide specifics on the proposed concessions.

Backers of the fund include Colorado Public Employees' Retirement Association, Indiana State Teachers' Retirement Fund, Oregon State Treasury, South Dakota Investment Council, Teachers' Retirement System of the State of Illinois and Washington State Investment Board.

Two LPs would not discuss whether they favored an extension. A third backer said he believes the firm will be able to garner the support needed. Another person said the fund's LP advisory board supports the extension.

The extension is expected to push out fund-raising plans for Elevation's next offering, one LP said. The debut fund's current performance would likely make raising a new fund a tough slog at the moment.

As of March 31, 2010, the fund was producing a negative 10% net internal rate of return, according to performance data from Oregon State Treasury. However, that figure doesn't include results from the sale of Palm Inc. (PALM), in which Elevation had about a 30% stake.

The sale of Palm to Hewlett-Packard Co. (HPQ) stands to bring Elevation less than $30 million in profits, hardly a home run but not the massive loss that some industry observers had predicted.

Other companies in the firm's debut fund include Forbes Media LLC, publisher of Forbes magazine; market analytics firm MarketShare Partners; and online review site Yelp. Elevation also holds a 1% stake in social networking company Facebook that it purchased on the secondary market in November 2009.

Elevation has also laid off fewer than 10 staffers, largely in back-office administrative support roles, a person familiar with the firm confirmed. News of the layoffs was previously reported by Fortune.

The layoffs are largely related to the exit of Palm. The firm had committed a half dozen people, including senior partners, to the restructuring effort at Palm, this person said. Additionally, Principal Patty Wexler, with Elevation since it started in 2005, has decided to leave the firm, according to the person.

Elevation has also added two added two senior level investors, managing directors Avadis "Avie" Tevanian and Rajiv Dutta, in recent months.

(Dow Jones LBO Wire covers news about private equity.)

-By Laura Kreutzer and Daniel Hausmann; Dow Jones LBO Wire; [e-mail]