There has never been a better time to launch a new private equity firm. Fundraising for PE firms is at an all-time high. Third-party back-office service providers make it easy to get up and running. And seasoned investment professionals in their 40s and 50s are ready to open up their own shops, as we identified in our recent list of 10 young and thriving PE firms.

Enter Mike Faremouth, Jim Guddy and Eric Bacon. Having worked together for many years at Cleveland-based Linsalata Capital Partners, the three launched Watervale Equity Partners in August. Unlike Linsalata Capital, which was a squarely middle market fund, Watervale is focused on the very lower middle market. The Cleveland-based firm is hitting the fundraising trail, looking to raise $125 million to make control investments in companies with less than $6 million of Ebitda. Transaction value will likely be less than $50 million. Limited partners are expected to be a typical mix of pension funds, endowments and family offices.

“We were seeing dealflow at this level, but it didn't fit LinCap's criteria. We started to realize this is where we belong,” says Faremouth, co-founder of Watervale. “We are attracted to these companies and there is a much larger population of companies. We believe it’s also very relationship based at this level, which we like.”

In addition to focusing on lower middle market deals, the firm will further distinguish itself by investing in manufacturing companies in the industrials and consumer space. “We will typically be interested in manufacturers of engineered products with good branding or a strong reputation that have opportunities for growth. A growth path is very important,” says Guddy, a co-founder of the new firm.

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