Carl Marks takes another buyout team under its wing

The firm, run by Partners Jeremy C. Schwimmer and Jeffrey N. Mizrahi, plans to cut equity checks of $10 million to $15 million to fund initial acquisitions and up to $50 million over time to finance growth at its portfolio companies through internal investment, add-on acquisitions or a combination of the two. The partners have a particular interest in family-owned companies that can benefit from growth equity, recapitalizations or succession planning and whose owners wish to stay involved. Target companies might generate up to $15 million in EBITDA.

Sand Oak Capital plans to invest on a deal-by-deal basis, using a combination of capital from its own executives, Carl Marks & Co and from a network of colleagues and friends. (The partners don’t rule out the possibility of raising a conventional buyout fund down the road but have no immediate plans to do so.) The firm intends to leverage companies conservatively, particularly at first, and to hold investments for three to seven years, altough it could be longer. That is one of the luxuries of not having a conventional 10-year limited partnership to manage. “We’re going to do great deals that have great potential,” said Schwimmer.

The Sand Oak Capital website lists two realizations and three active portfolio companies, including CherryPharm, a company that makes a tart cherry juice that people drink to improve their health and athletic performance.

Schwimmer, who led all five deals, in 2009 founded the predecessor to Sand Oak Capital, which did business as Sand Oak Capital Partners. Schwimmer started his career on Wall Street and San Francisco in corporate finance in the late 1990s before moving to upstate New York to run a company owned by his wife’s family, Roth Steel Corp.

Schwimmer led Roth Steel through a succession plan from 2004 to 2008, a period in which the company “grew substantially and was highly profitable,” according to a source close to the business. (Roth, a processor of recycled metals, was acquired in mid-2011 in a management buyout that saw Schwimmer’s wife transfer her interest to other family members. The company reportedly shut down earlier this year; Buyouts was unable to learn why, and Schwimmer did not provide any insights when asked about it later through a spokeswoman.) Schwimmer in 2008 leveraged his experience at Roth Steel to acquire and run another business, Thermold Corp, a maker of plastic parts that is still in the Sand Oak Capital portfolio. 

Mizrahi joined Sand Oak about a year ago after being introduced to Schwimmer by a mutual friend who knew he was wrapping up work as a vice president at York Capital, where he helped identify opportunities to invest in family-owned companies. Earlier, from 2009 to 2011, Mizrahi worked as a vice president at mid-market buyout shop Lindsay Goldberg. There he worked on transactions in such industries as energy services, construction, food manufacturing and natural gas.

After re-incorporating the firm last year, Schwimmer and Mizrahi had thoughts of raising a conventional buyout fund but instead this June decided to become an affiliate of Carl Marks & Co and to move into its offices. “Rather than slog through a fundraise, Carl Marks jumpstarted us,” said Mizrahi. Carl Marks will invest in Sand Oak Capital deals, and Carl Marks executives will share market intelligence with Schwimmer and Mizrahi, but Carl Marks does not have a stake in Sand Oak Capital, Schwimmer said.

Carl Marks, which traces its history to 1925, began incubating and nurturing principal investment teams in the 1960s. It has been in the private equity business since 1971. One of its teams, doing business as CM Equity Partners, invests growth capital and sponsors buyouts of companies in aerospace, defense and business services. Like Sand Oak Capital, CM Equity does transactions on a deal-by-deal basis. It raised a $90 million buyout fund in 2001, according to Thomson One, a data service of Thomson Reuters.