Catalyst Investors Mulls Third Fund In 2009

Firm: Catalyst Investors

Fund: Catalyst Investors Fund III

Target: Between $300 million and $500 million

Placement Agent: Berchwood Partners

Legal Advisor: Kirkland & Ellis

New York-based Catalyst Investors expects to begin marketing its third fund next year for investments in media, communications and related Internet services industries.

Catalyst Investors III is expected to carry a target of between $300 million and $500 million. Fund II, which is a little less than half invested, plus a U.K. vehicle, together collected $170 million between 2005 and 2007. The firm’s debut fund closed in June 2000 with $110 million in capital commitments. Past backers include a mix of family offices, financial institutions, fund of funds and municipalities. The firm’s placement agent is Berchwood Partners, and its legal advisor is Kirkland & Ellis.

Catalyst Investors typically invests between $5 million and $30 million alongside management teams in either expansion deals, acquisitions or recapitalizations. It looks for U.S. and Canadian companies generating annual revenue ranging from $20 million to $100 million, and sometimes sponsors add-ons. Its geographic concentration is in the United States and Canada. The firm holds on to companies for between three and seven years.

Brian Rich, managing partner, anticipates making 12 to 15 deals from Fund III, over a three to five year period, doing deals of $40 million to $50 million each, assuming the fund size reaches $400 million. Prior to co-founding Catalyst Investors, Rich founded TD Capital, a firm that makes U.S.-based investments in communications-related industries for Toronto Dominion Bank.

Portfolio companies include Advantage Business Media, which has more than 20 print and online business-to-business publishing properties;, which offers Website services for small and mid-size businesses; Clearwire, a provider of high-speed Internet and phone services; and MDH, a data center operator.

The firm recently sold MessageLabs, a U.K.-based provider of online messaging and Web security services. It completed the $695 million sale in mid-November. MessageLabs, which generated revenue of about $145 million for the fiscal year ended July 31, had raised roughly $59 million in funding, including $36 million from Catalyst Investors and co-investor Madison Dearborn Partners in 2000.