In an interview this week with Buyouts, Chairman and Managing Partner Carter Bales, 73, said that his three-year-old firm, which has raised about $165 million between seed funding and capital for one-off deals, launched its debut institutional fundraising effort at the start of the year. The firm has held more than a hundred first meetings and calls with potential investors, including managers of funds of funds, family offices, insurance companies, universities and corporate pensions.
About $40 to $50 million in commitments to NewWorld Environmental Opportunities LP is spoken for, said Bales. Ideally, he added, the firm would like to reach a $100 million first closing this November and to hold rolling closings building to a final closing by the middle of next year. While not employing a placement agent to approach North American investors, the firm may hire one to help raise money from European investors later this year. Earlier in his career, as a managing partner of The Wicks Group of Companies, a New York private equity firm that specializes in education and media, Bales worked with Merrill Lynch to raise a $383 million fund in the late 1990s, and with Credit Suisse to raise a successor of $535 million fund a few years later.
NewWorld Capital makes growth equity investments in mid-sized and small companies operating in five main markets: energy efficiency, clean energy, water resources and reclamation, waste-to-value and environmental services. Together companies in these markets are generating some $350 billion in annual revenue in the United States and growing two to four times as fast as GDP, Bales said. They’re taking advantage of long-term trends such as the planet’s move away from its dependence on oil and gas as energy sources; growing scarcity of water and other resources; the need to reduce pollution and head off global warming; and the desire by companies to reduce costs.
Within these markets NewWorld Capital prefers investing in complex situations involving U.S. and Canadian companies that have commercially viable products generating positive EBITDA and that need $15 million to $40 million to scale up production and distribution. The firm avoids technology risk, regulatory risk, hydrocarbon-pricing risk and capital-intensive business models.
Through the first quarter of this year the firm had sourced and screened some 586 deals and closed two. The firm and a group of co-investors invested about $30 million in equity last August to acquire Cleaire Advanced Emission Controls LLC of San Diego for an estimated $55 million. The company manufactures filters that help reduce emissions from diesel engines used in trucks and other vehicles.
Earlier the firm committed $15 million in equity (to be invested in installments as the company hits milestones) to Denver-based Coolerado Corp., a maker of energy-efficient commercial air conditioning units, Bales said. At the end of this month the firm expects to have invested $12.5 million in equity in the company. NewWorld Capital intends to close two more transaction in the next quarter, including a third transaction next month using money from a $50 million separate account it manages for funds-of-funds manager North Sky Capital (known as Piper Jaffray Private Capital prior to its recent spin-out).
Bales emphasized that NewWorld Capital is not about double bottom-line investing. The firm is about generating a high return for investors; any good the companies end up doing for people or the planet is simply a side benefit.
Still, the potential for doing good was an attraction for Spitzer. She joined NewWorld Capital in January as a principal after a stint as managing director at investment firm Metropolitan Capital Advisors. “For me it’s all about impact,” said Spitzer, 54, whose responsibilities include business development. Spitzer, who early in her career was an M&A and corporate finance attorney at Skadden, Arps, Slate, Meagher & Flom LLP, has been working to reduce air pollution through a number of recent activities. As first lady of New York state from 2007 to 2008, Spitzer worked on programs to promote the administration’s goal of a 15 percent reduction in fossil energy consumption by 2015; she is co-vice chair of the Urban Green Council, the New York chapter of the U.S. Green Building Council, which works to reduce energy consumption in cities.
Spitzer told Buyouts she met Bales about five years ago after someone recommended he’d be a great person to help her get up to speed on environmental issues. Ever since, Bales has been sending her “tomes” to read and names of conferences to attend and sharing ideas over breakfasts and lunches. Spitzer said that as she watched the creation of NewWorld Capital it became a “dream to be a part of it.”
Along with Bales and Spitzer, executives at NewWorld Capital include Managing Partner Bill Hallisey, formerly a managing director at GSC Group; Managing Partner Ali Iz, formerly business development leader at GE Energy; Managing Partner Everett Smith, previously a managing director at New Energy Capital; and Partner and Chief Technology Officer Lou Schick, who previously oversaw a portfolio of environmental companies at the hedge fund Ritchie Capital. Hallisey, Iz, Smith, Schick all have backgrounds that include stints at GE, as does Bob Kennedy, the chief financial officer.
The firm has a roughly nine-member strategic advisory council. One of its members is Nino Tronchetti Provera, CEO of Ambienta Sgr., the European private equity shop that has been one of the early backers of NewWorld Capital. McKinsey & Co., the consulting firm where Bales was a director from 1978 to 1998, serves as a special strategic adviser to the firm, providing research and insights and other resources.
NewWorld Capital offers mainly standard terms on its debut fund, including a 2 percent management fee, 20 percent carried interest and 8 percent preferred return. However, the firm also offers an LP-friendly distribution waterfall in which LPs receive back all of their capital contributions plus the preferred return before the general partner gets to receive carried interest.
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