Call it Christmas in July. Not only have a handful of buyout shops been able to escape the torment of fund raising in the last few weeks, but they’re getting out with more than they bargained for. Among those buyout shops is American Securities Capital Partners, which this month closed its third fund at its cap of $650 million.
The New York private equity firm launched American Securities Partners III LP in the fourth quarter of 2000 and, by Q1, knew it would be a whopper. Michael Fisch, the president at American Securities, said the firm met with investors through the first quarter of this year, but ceased those meetings when it became probable that the fund would be oversubscribed. “The macro environment is challenging, but we were very fortunate to become oversubscribed in less than six months,” he said. “Our target was $500 million. We set a cap of $650 million, and we exceeded that cap and turned away signed subscriptions from some and were forced to reduce subscriptions from others to keep our cap.”
Some of the credit has to go to Credit Suisse First Boston‘s placement group, which represented the fund, said Fisch. American Securities retained the same group to place its $350 million Fund II three years ago.
American Securities Partners III held a first closing with the firm’s existing investors at the end of 2000 which brought in approximately $250 million. A closing of equal size followed in March. Following earlier convention, The majority of the commitments in Fund III came from wealthy families and Wall Street professionals. Among the institutional investors, University of Texas, Sun America and Travelers Insurance Co. re-upped in the most recent fund. AMR Investments, DuPont Pension Trust, Goldman Sachs‘s private equity group, Howard Hughes Medical Institute and the New York State Common Fund, through Hamilton Lane, invested with American Securities for the first time.
Following the example of its predecessor funds, Fund III will seek to invest in deals that range from $75 million to $250 million, mainly in companies with trailing Ebitda of at least $10 million, said Fisch.
“Our focus is on market-leading businesses, typically high market share companies, with exceptional management teams in whatever industry we can find them,” Fisch said. “It happens that we are very comfortable with manufacturing businesses, and 65% of the dollars we have invested in the last eight years have been in manufacturing.”
However, the firm has also invested in companies in direct marketing, broadcast media, utilities and quick service restaurants.
Fund I, which is almost entirely realized, will generate an internal rate of return approaching 50% compounded, said Fisch, and Fund II is expected to meet or exceed that number.