Flexpoint Partners Gears Up For Fund II

Two and a half years after closing its first buyout fund, Flexpoint Partners LLC is in the planning stages for its sophomore vehicle. The firm’s first fund is about 50 percent invested and the principals are hammering out size and strategy details for their next offering, a prospective investor told Buyouts.

“The minute they have 75 percent invested they want to have their PPM on people’s desks and just get it out of the way because they don’t want to be capital constrained,” said our source, who speculated that the new fund may be in the market by the end of the first quarter. We were unable to reach any principals at the firm by press time.

Chicago-based Flexpoint Partners invests in health care and financial services companies. The firm deploys equity slugs between $10 million and $100 million per transaction, and usually takes a control stake in growing companies. Donald Edwards, a former principal at buyout shop GTCR Golder Rauner LLC, also in Chicago, founded Flexpoint in 2005 and serves as managing principal. Fellow principals include Ethan Budin and Charles Glew, both of whom followed Edwards when he left GTCR.

In June 2005, Flexpoint Fund LP, the firm’s inaugural vehicle, announced its first and final close on $225 million, which came primarily from endowments and foundations. Yale University served as the lead investor, with Commonfund Capital Inc., Ford Foundation and Massachusetts Institute of Technology also signing on as limited partners. Gerald J. Ford, a financial services executive who has spent the last 30 years buying, running and selling banking businesses, advises the firm and is billed as a “Special Limited Partner” on its Web site. Ford is the banking guru who in 2002 sold Golden State Bancorp, a holding company for banks, to Citigroup for roughly $6 billion.

It is unclear how much the firm will shoot for with its next vehicle, but our source believes it could be as low as $400 million or as high as $1 billion. The investor believes that one determining factor will be how active a role Ford takes with the next fund. For its first vehicle, the firm focused on small deals. “Size is the enemy of returns” was the mantra for the fund, according to our source. The firm’s portfolio includes IntegraCare Home Health, a Grapevine, Texas-based provider of home health care services for rural communities, and Norwich Group Inc, a commercial insurance company based in Rosemont, Pa.—J.P.