Huron Capital Partners LLC is among a handful of private equity firms that have recently raised new generalist funds, going against the common wisdom of the last few years that generalist funds were waning. At $500 million, Huron Fund IV is the Detroit firm's biggest fund to date. Like Huron's previous funds, it will make control investments in lower middle-market companies.
The fundraising climate today is "tough overall," reports partner Gretchen Perkins. "But capital is available for funds that have delivered strong and consistent results."
Although the firm raised funds quickly - fundraising began in October, and the fund closed in December - the process was more challenging than it had been for the previous fund, which was raised during the exuberant market of 2007.
"Limited partners are much more picky today," explains Perkins. "They conduct a far greater level of due diligence, and it requires more resources internally to respond to all of that."
Huron went into the process well prepared, Perkins says. "We found that great LPs were prepared to move, with lots of detailed, comprehensive backup."
The firm added some new investors, as well as retaining past investors.
The new fund will invest in companies with the same criteria as previous funds, without a focus on particular industries. "While we do invest in a range of industries and sectors, we do focus very specifically on solid companies where we believe we can improve operations to create value," explains Perkins about the firm's investment thesis.
"We will continue to invest $10 million to $50 million of equity in lower middle-market companies in the new fund. Additionally, we can invest up to $100 million and, therefore, close deals with no outside financing."
The last three businesses that Huron has invested in from its third fund are "representative of the types of businesses in which we will continue to invest from our new fund," she says. These include Six Month Smiles, a provider of cosmetic orthodontics; Ronnoco Coffee, a coffee roaster and distributor; and Bloomer Plastics, a producer of engineered plastic films.
When asked how the dealmaking environment is shaping up in 2013, Perkins responds, "I would say stable. We are closing on three companies now, which is on pace with 2012."
For more on generalist funds and other current bright spots in private equity fundraising, see the cover story in this issue. For a data-rich look at dealmaking in the first quarter of 2013, see WrapUp: Q1, also in this issue. For a video interview with Perkins, visit themiddlemarket.com/video.