All Aboard for Greenbriar’s Fund –

Rye, New York-based private equity firm Greenbriar Equity Group LLC this month wrapped up its debut fund at $700 million, taking in $100 million more than originally targeted. Greenbriar Equity Fund LP, which was launched in July 2000, is focused exclusively on transactions in the transportation sector.

Transportation industry veterans Joel Beckman, Jerry Greenwald and Regg Jones founded Greenbriar Equity in order to take advantage of what they saw as a relatively untapped opportunity in the private equity world. “What we saw was a very large and diverse market in transportation . . . and a very limited focus by generalist private equity firms,” said Beckman. “We thought that created a combination for a terrific opportunity and hopefully a terrific private equity firm focusing in those areas.”

Speaking of the fund raising process, Beckman said, “When we came to market, people were very much focused on technology and telecom . . . the markets have proven that just about everything has issues of risk and cyclicality. And I think that it was – certainly in the early going, given the focus on the venture side and away from buyouts – a fair amount of work. But as we were able to speak to more investors, and as the market turned a little bit, we were able to pick up a fair amount of momentum. Ultimately, we were very pleased with the outcome.”

The key to the Greenbriar Equity plan is its partners’ industry expertise. Beckman and Jones, each at different times, headed the global transportation business at Goldman Sachs, and Greenwald was most recently the chairman and chief executive officer of UAL Corp., the parent company of United Airlines. Beckman explained, “The way we look at it, [having industry expertise] impacts [the firm] in at least three areas: the ability to access deals on a preferred or proprietary basis; the ability to analyze those transactions because these are markets [we’ve] been in for years so [we] can really understand the dynamics and the risks; and then ultimately, the ability to be something more than simply a financial party, but to bring a strategic perspective in partnership with management.”

Apparently quite a few limited partners concur. The fund attracted a broad spectrum of investors including: Allianz, Citigroup, CMS Companies, Dresdner Kleinwort Wasserstein, Fleet, J.P. Morgan Chase, Ontario Municipal Employees Retirement System, Princeton University, Rho Management, Task Holdings, The Bill and Melinda Gates Foundation, The Robert Wood Johnson Foundation, University of Chicago, The Wellcome Trust and pensions funds of Delta Air Lines, Lockheed Martin Corp., and Boeing Co.

Additionally, one-third of the fund’s commitments derives from a strategic joint venture the firm formed with Boston-based Berkshire Partners, which wrapped up its own $870 million close this month (see story Berkshire Partners Lands First Close). Berkshire will invest alongside Greenbriar Equity in each transaction the Greenbriar fund makes and all the investment decisions will be made jointly. Greenbriar will also participate in all Berkshire’s transportation investments in the same manner.

On the Fast Track

The firm’s transportation focus will include traditional sectors like planes, trains and automobiles, but will also extend into related sectors such as logistics, manufacturing, energy, infrastructure and retail. The global transportation industry encompasses over $2.5 trillion of assets worldwide.

Greenbriar Equity will seek both majority and minority stake positions and will look to structure deals in a variety of ways, including traditional leveraged buyouts, recapitalizations, growth capital investments, corporate joint ventures and privatizations, said Beckman. However, the fund will not make any start-up or venture investments. Although, Beckman said the firm is thinking less about size than the merits of the deal, the fund will likely make equity investments between $25 million and $250 million. The firm’s sweet spot is equity investments between $50 million and $100 million. With help from Berkshire Partners and certain limited partners, the fund will be able to invest in larger deals if the opportunity arises.

To date, Greenbriar Equity and Berkshire Partners have made one investment, purchasing a majority stake in Active Aero Group, a provider of expedited air charter services for freight, in July 2000 (Buyouts, July 17, 2000, p. 6).