November 11, 2013
Young sponsors get creative to win LP green
By Steve Gelsi
Trive Capital, which seeks to acquire under-resourced mid-sized companies, wrapped up its fund above its initial $250 million target in about five months. But many other rookie and next-generation general partners haven’t had such had such an easy time in 2013’s choppy waters.
Those that have moved past the one or even two-year marks on fundraising efforts include Staley Capital, a Waltham, Mass.-based firm led by Managing Partner Renny Smith, a Thomas H. Lee Partners veteran. The firm specializes in providing growth capital to business service firms. Also out for that long: A&M Capital Partners, an independent affiliate of turnaround specialist Alvarez & Marsal led by Michael Odrich, former head of Lehman Brothers Private Equity. The firm also employs veterans of BA Capital Partners and Gryphon Investors.
Brian Gallagher, a partner with Chicago-based fund of funds manager Twin Bridge Capital Partners, said no more than 10 percent of young firms manage to raise funds “almost instantaneously” while a sizable group gets there in 12 to 15 months. A large group takes even longer to get to their target, but lives to fight another day. And even others have been out fundraising for three years.
“Lots of groups have taken well over 100 meetings to land their fund,” Gallagher said. “You should take that trip to Juneau, Alaska, because you’ve laid the groundwork for the next fundraise. It’s never a waste of time.”
Gallagher said he’s been hearing a lot of pitches from younger funds positioning themselves as distress and turnaround specialists to LPs who want to find the next early Sun Capital, or Marlin Equity.
“LP’s are looking for a differentiated strategy—some sort of hook, some sourcing advantage, a selective deal profile and demonstrable operational skills—(plus) the ability to grow revenue and margins and improve cash flow.”