Capital Resource Partners, a Boston-based private equity firm, this month held a first close on more than $60 million for Capital Resource Partners Lean Opportunities Fund LP. The new vehicle, which follows four mezzanine funds, is the firm’s first equity fund. It will invest both independently and alongside CRP IV LP in manufacturing businesses where lean operational strategies can be implemented.
CRP expects to raise between $100 million and $150 million for the Lean Opportunities Fund and aims to wrap up the final close in the first quarter of next year. Over the life of the fund, CRP plans to make between eight and 12 investments from the new fund, contributing approximately $10 million to each deal.
The Toyota Motor Co. originally developed the lean business strategies that inspired the fund. The set of strategies intended to improve operations for manufacturing businesses has been in use for almost 40 years, but is relatively new to businesses in the U.S. “While the principles behind the lean manufacturing improvement process are quite old . . . it’s something that hasn’t been done much in the U.S.,” said Robert Ammerman, a managing partner at CRP. “And frankly we’re excited about having what we perceive to be a fairly unique opportunity to apply these techniques in this space because we’re not aware of others who are actively and specifically addressing the implementation of these techniques in a manufacturing context.”
The firm gained experience with this particular approach to manufacturing improvement through some of its portfolio companies such as Spir-it Inc., a manufacturer of plastic disposable products for the food service industry, in which they invested in 1998, and Pro Group Inc., an industrial furniture and material handling equipment manufacturer, which they invested in last year.
CRP views the Lean Opportunities Fund as a companion vehicle to its fourth mezzanine fund, which completed fund raising in January 1999 at $425 million. In situations where subordinated debt is required to complete the acquisition, CRP IV will provide mezzanine debt alongside equity from the Lean Opportunities Fund. The combined funds will be control shareholders. CRP IV, which is currently 40% invested, will continue to make investments independently in CRP’s additional focus areas which includes consumer and business products and services in both tech and non-tech spaces.
Although this is CRP’s first time raising an equity fund, its previous funds have made blended investments that include both mezzanine and equity. CRP IV, when fully invested, is expected to breakdown as 75% mezzanine and 25% equity. The fund will consider up to a 50%/50% split.
On the Floor
For this effort, CRP brought John Cosentino on board as an operations partner. He joins the 14 person-strong investment staff that oversees both funds, complementing their financial backgrounds with his 20 years of operational and strategic background.
The fund is drawing in many of the firm’s previous limited partners from its 13-year history, as well as new investors and what the firm terms strategic investors.
“We’ve had a number of individuals and corporations invest in the fund who are basically people who have experience training in the implementation of these lean manufacturing techniques,” said Ammerman. “They’re going to be part of our network of resources to implement this strategy.”