Carousel Capital Misses Target With Third Fund

Firm: Carousel Capital
Fund: Carousel Capital III LP
Target: $300 million
Amount Raised: $210 million
Placement Agent: Benedetto Gartland & Co.

Carousel Capital, a Charlotte, N.C. firm that decided to add more institutional investors to its investor base, ended up falling short of its $300 million target with a final closing last month at $210 million.

“This has been a very, very good market for Steve Schwarzman,” said a source with knowledge of the firm. “But for people trying to break into the broad institutional market for the first time it’s just tough to get a share because people are so busy doing other things. They’re a terrific group; they just hit some trouble.”

Carousel Capital raised its prior two vehicles mainly from wealthy investors and business executives living in the southeastern United States, where the firm makes its investments. The firm began raising Carousel Capital III LP in early 2006. Its principals are “thrilled with the LPs they got,” including South Carolina Retirement Systems, which ponied up $30 million, according to our source.

With its fresh money Carousel Capital plans to invest $10 million to $30 million in equity in companies generating EBITDA of between $3 million and $15 million. The firm focuses on businesses services firms, health care services companies and some consumer product manufacturers. Recent acquisitions include Jameson, a South Carolina-based manufacturer of tools and equipment used by utility and telecommunications workers as well as military personnel; and Axium Healthcare Pharmacy Inc., a provider of specialty pharmacy services located in Lake Mary, Fla.

Carousel Capital was created in 1996 by co-founders Nelson Schwab III and Erskine Bowles, a former partner at Forstmann Little & Co. who served for two years as White House chief of staff to President Bill Clinton.

The firm’s inaugural fund closed on $160 million in 1997. Three years later, Carousel Capital II LP closed, also with $160 million. Prior investors in the firm’s funds include Bank of America Capital Advisors and Liberty Life Insurance Co.—J.P.