Arlington Making Headway With Third Fund

Washington, D.C.-based Arlington Capital Partners, which invests in companies in heavily regulated markets like defense, aerospace, telecommunications and health care, is slowly making headway raising its third fund, according to a source familiar with the situation.

In October 2008, Buyouts reported that Arlington Capital was readying fundraising materials for its third fund. The firm officially launched Arlington Capital Partners III LP a little more than a year ago with a target of $750 million, and it has so far gathered more than $300 million, said our source. Credit Suisse is serving as placement agent. Arlington Capital did not respond to a request for comment.

According to our source, the firm tried to get to a rapid first close, not fully recognizing that many limited partners did not have the liquidity at the time to make a pledge. “Anyone who could re-up with them has re-upped with them,” the source added, adding that the firm is unlikely to hold a final close for the fund before the end of this year.

Arlington Capital Partners I LP, raised in 1999 and 2000, secured $452 million in commitments, and the firm gathered $585 million for Fund II in 2006. Backers include public and corporate pension funds, endowments, financial institutions and funds of funds.

The firm invests in mid-market companies, mainly in the United States, with values of between $50 million and $500 million. In August, TSI Group Inc., a thermal management and electronics cooling company and a portfolio company of Arlington Capital, acquired J.A. Reinhardt and Co., a provider of brazing and thermal management solutions. And in September, another portfolio company, Chandler/May Inc., a provider of military ground control stations, acquired AeroMech Engineering Inc., a provider of unmanned aircraft engineering services and manufacturing.

Jeffrey Freed, managing partner, and Robert Knibb, partner, founded the firm in 1999.