Defense Is the Best Offense For Military-Focused Firm

Firm: J.F. Lehman & Company

Fund: JFL Equity Investors III LP

Target: $450 million

Amount Raised: $575 million

Placement Agent: Stanwich Partners

Despite Washington’s vow to cut defense spending, a recent successful fundraising drive by a defense-related private equity firm shows some investors remain confident that money can still be made within the military-industrial complex.

The latest offering by J.F. Lehman & Company, JFL Equity Investors III LP, which focuses on mid-market defense and aerospace firms, closed with $575 million in commitments, well above the firm’s initial $450 million target.

The firm was founded in 1992 by John Lehman, a former secretary of the Navy, along with Donald Glickman and George Sawyer. In addition to the firm’s founders, many staffers have military and defense expertise. Based in New York, the firm also has offices in Washington, D.C., and London.

George Hopkins, the executive director of the Arkansas Teacher Retirement System, which committed $39 million to Fund III, said J.F. Lehman had “credibility, reliability and strength in the defense industry,” adding that the firm’s “positioning in this area is stellar.”

Arkansas Teachers is one of 36 institutional investors that have committed to the fund. Other investors include the Connecticut Retirement Plans & Trust Funds, which committed $50 million, and the New Mexico Educational Retirement Board, which committed an undisclosed amount. In addition, endowments, foundations, funds-of-funds and insurance firms have committed to Fund III.

Already, Fund III has completed one acquisition, its June 2011 purchase of U.S. Joiner, a provider of military and commercial shipbuilding solutions. Investments by J.F. Lehman typically range between $25 million and $75 million and are heavily weighted to corporate divestitures and the acquisition of founder-owned companies.

The firm’s first two funds garnered nearly $500 million in commitments. The placement agent for Fund III was Stanwich Partners of Wilton, Conn. Calls to J.F. Lehman were not returned.