With a refreshing change of attitude, FCP Investors last week held a final close on $150 million for its sixth fund. The Tampa, Fla.-based firm set out last summer to raise $125 million, but put a hard cap on the fund at $150 million to keep its deal size down.
Glenn Oken, a general partner at the firm, described the fund raising as both enjoyable and strategic. “I know most people think fund raisings are exercises in masochism,” Oken said. “but I think it’s a good opportunity to reflect on your own strategy and have people tell you what they think about your work.”
Fund VI is made up mostly of previous investors in FCP funds, and includes university endowments and wealthy families. Strategically, the fund will follow its predecessor, a $102 million fund, in terms of strategy, by focusing on small deals, primarily consisting of recapitalizations and consolidations.
Oken said he thinks the firm’s strategy is what made fund raising so painless.
“Conservative-minded investors like endowments and families do consider the risk profile of our investments, and we offer a better risk return profile to our LPs than others,” he said. “There is better value to be found for our LPs in the smaller deal sector.”
Fund VI held two closes prior to the final to accommodate those who stepped up early.
FCP’s focus has noticeably gone the way of the recap over the past few years. The firm likes that structure because the deals are “marriages, as opposed to just financial transactions.”
The firm closed its first deal out of Fund VI in March, but Oken declined to share the industry in which it occurred because that “tends to invite competition in the consolidation effort,” he said.
Oken said the outlook for FCP’s deal flow is excellent, based on the size of deals the firm targets and available opportunities for recaps. The firm’s minimum profit criterion for companies to be purchased is $2 million of historical Ebit.
“There are so many companies for which a recapitalization is appropriate at any given time, rather than an outright sell,” Oken said. “However, if we were in the middle market, I wouldn’t expect deal flow to be as good – I’m sure it would be competitive, tight and tough.”
To support, or justify, the increase in size from Fund V to Fund VI, FCP has added its seventh partner, Matt Young.
Young is the firm’s first operating partner, having previously run three manufacturing companies.
“As an operating partner, Matt will be very helpful to us, especially since we will have a larger portfolio than in Fund V,” Oken said.