Fund Closes: Tech Build-up Firm Celerity Seeks $100M for Fund III –

Celerity Partners, a Silicon Valley buy-and-build firm, in March held a first close on their third buyout fund, which has a target of $100 million.

Celerity Partners III rounded up commitments of approximately $25 million from GE Capital Corp., Dredner Kleinwort Benson and First Dominion Capital. Mark Benham, a partner at Celerity, said he expects most of the limited partners from his firm’s last fund to re-up for the new effort. Celerity Partners II closed on $38 million in 1998 and is fully invested.

Unlike many of its Sand HillRoad brethren, Celerity only invests in companies with significant earnings and cash flow, and prefers to share control with management. The firm’s specialty is researching sectors that supply parts to the broader technology market and executing consolidation strategies in the selected spaces. Last month, Celerity took public Dynamic Details Inc., a printed circuit board build-up that it invested in with partner Bain Capital. The two firms together invested approximately $100 million in Dynamic Details, which was started in 1996 with the acquisition of Dynamic Circuits. The company since then made five acquisitions before having an initial public offering on April 17, a day many market observers predicted would be known as Black Monday, owing to the preceding devaluation of the Nasdaq. The company was priced at $14 per share and, at press time, was trading at [tk].

Celerity is also teaming with Bain Capital on the build-up of Surface Mount Technology Corp., an electronic manufacturing services concern. The company was formed in 1998 and, to date, Celerity and Bain Capital have injected more than $20 million in equity into it.

Celerity is currently working on building a company that will service the data storage market, but Benham declined to give further details.

Benham said his firm’s sector-focused approach to investing allows it to avoid auctions on 75% of its acquisitions. “We’re not random and opportunistic like a lot of other places,” he said, adding that company owners are more likely to want to team with private equity investors who can show some industry expertise.

In many of the firm’s acquisitions, GE Capital and First Dominion have provided senior debt and some equity, while Dresdner Kleinwort Benson has provided mezzanine financing on a number of deals.

Benham and Steve Adamson head up Celerity’s investment efforts.