Adams Capital Management (ACM) held a $420 million first and final close in early December on Adams Capital Management III LP, said Joel Adams, a general partner at the firm. ACM launched the $300 million-targeted vehicle in early September, Adams added.
The new fund is more than twice the size of 1999’s $150 million Adams Capital Management II LP because the firm wanted to have enough capital to do about 20 deals, Adams said. Information technology and telecom companies are also capital intensive businesses, he added, noting ACM wanted to be able to put more money to work in its portfolio companies in subsequent rounds of financing. “There were certainly companies in Fund II where we wished there was more money to invest,” he added. Fund II is now fully committed to 14 companies, he said.
The vehicle will focus on early-stage companies in the IT and telecommunications industries for the most part, Adams said. Recently, ACM has been very interested in deals in the optical components, supply chain and wireless networks market spaces, he added. “We have a markets-first strategy. First, we find emerging market spaces, and then we back the best companies in those spaces,” he explained.
Fund III should invest in about 20 companies with a typical deal size ranging from $15 million to $30 million spread over several rounds of financing, Adams said.
While the firm has no geographic bias in its investment strategy, it sources a number of deals in the areas surrounding its offices in Austin, Texas; Palo Alto, Calif.; Yardley, Pa.; and Sewickley, Pa. he added. “We are very active within two hours of our offices,” he added.
The vehicle’s quick fund-raising pace and the additional $120 million in capital can be attributed to ACM’s existing limited partners’ support for the new vehicle, Adams said. Some 75% of the fund’s capital comes from the firm’s existing LPs, he commented. ACM had also been in conversations with potential new LPs prior to the launch of Fund III, he added, noting this meant these investors were waiting and ready to invest when the vehicle was launched.
New LPs in the vehicle include the University of Richmond, INVESCO Private Capital, State Teachers Retirement System of Ohio, Allegheny Technologies Inc., Erie Indemnity Co. and Ft. Washington Investment Advisors. The firm’s existing LPs include the Hillman Co. and Commonfund.
Adams declined to reveal the vehicle’s carried interest structure and management fee, beyond describing them both as traditional. He said ACM’s five general partners put up more than 1% of the fund’s total capital. To date, the new vehicle has made one investment in Intrinsity Inc., a semiconductor technology provider of circuit and EDA technology. Adams declined to say how much ACM invested in Intrinsity.