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CI Capital Raises $620M For Roll-Up Deals

Firm: CI Capital Partners LLC

Fund: CI Capital Investors II LP

Amount raised: $620 million ($500 million target)

Placement agent: Lazard Freres & Co.

Legal adviser: Paul, Weiss, Rifkind, Wharton & Garrison LLP

CI Capital Partners LLC has closed the guest book for its first institutional fund.

The New York firm announced that it held a final close for its CI Capital Investors II LP fund with $620 million in commitments, exceeding its $500 million target. But Steven M. Lefkowitz, the president of CI Capital Partners, told Buyouts that this was actually the first time that firm, a specialist in mid-market buyouts, has invited outside institutional money to participate in a single-purpose, dedicated fund.

Founded in 1993 as Caxton-Iseman Capital by Frederick J. Iseman, its chairman and CEO, and Lefkowitz to invest private capital on behalf of the New York hedge fund group Caxton Associates, the firm has relied almost exclusively on house money to make its investments. (The firm considers its portfolio from 1993 to 2008 to be Fund I.) Even in this new pool, the managing principals of CI Capital are collectively the largest investors in the fund, the firm said in its announcement.

“While it took us a fair amount of time, we’re pleased with the outcome,” Lefkowitz said. CI Capital Partners went to market in the fall of 2008, just as financial markets were tumbling into crisis. The firm had a first close in November 2008, with commitments from Bruce Kovner, the founder of Caxton Associates, and a handful of close associates. Those investors gave the fund an extension on its fundraising period as markets froze in 2009, but the reception improved markedly as economic conditions improved as 2010 progressed, Lefkowitz said.

CI Capital Partners targets mid-market companies in fragmented industries where it can grow its portfolio companies by acquisition. The firm prefers to write checks of $25 million to $100 million per transaction in industries including business and consumer services, distribution and government services, including defense, Lefkowitz said. “We’re interested in buying things that are capable of scaling.”

The firm has already made two investments out of Fund II, including a deal in January for Tech Air, a distributor of industrial gases based in Connecticut. Lefkowitz said that deal represents a return to that market for the firm. CI Capital Partners had previously owned Valley National Gases, based in Independence, Ohio, which it bought in February 2007 and built through a series of eight add-on deals. CI Capital Partners exited the company in the second quarter of 2009 through a sale to a strategic buyer, Matheson Tri-Gas Inc., whose Japanese corporate parent, Taiyo Nippon Sanso Corp., was eager to establish a foothold in the United States. Lefkowitz said the firm earned a 3x return on the $572 million exit.

Another portfolio company, American Residential Services LLC, has grown into a national provider of cooling, heating and plumbing services to the home repair market through more than 20 acquisitions, and that number eventually could reach 40 to 50 add-ons, Lefkowitz said. “We’ve been able to partner with exceptional teams that have been able to scale companies in the past.”