Gainline, with Lincolnshire pedigree, heads for cap on Fund II

Gainline Capital Partners, formed by two former Lincolnshire Management executives in 2015, is eyeing the cap on its second fund as it moves through a market that has proved challenging to new managers.

Gainline is among a handful of newer managers seeking capital from limited partners that are increasingly hesitant to extend beyond their well-established relationships. New funds, which always struggle to attract capital, are facing more extreme factors in today’s market, including potential LPs who are tapped out through re-ups and overweight exposures to the asset class.

“It’s never a perfect time to be an emerging manager … it’s so dependent on so many different variables,” said an LP consultant with a focus on new managers.

Overall, fundraising has slowed mightily from last year. In the first half, 417 buyout, growth, venture and other private equity vehicles raised almost $255 billion. That’s down 18 percent from a year earlier, according to Buyouts’ data. (Check out Buyouts’ sparkly new interactive fundraising chart to drill down on the funds behind the quarterly numbers).

Gainline raised about $350 million, according to a person with knowledge of the frim. The firm was targeting $300 million for Fund II, with a $400 million cap, according to a person with knowledge of the firm. The fund could hold a final close by year end, or early 2023, the person said.

Credit Suisse is working as placement agent on the fundraising. A Gainline spokesperson did not return a comment request Thursday. The firm managed about $680 million as of December 31, according to Gainline’s Form ADV.

Gainline closed its debut fund, Gainline Equity Fund, on $155 million in 2019.

Allen Weinstein, managing partner, and Rick Sullivan, partner, co-founded Gainline in 2015. Both spent time working at Lincolnshire. Weinstein worked at Lincolnshire for nearly 18 years, before leaving in 2012 and joining CAI Private Equity as managing partner. Sullivan worked at Lincolnshire from 2004 to 2015.

The firm invests in lower-mid-market businesses in business services, niche manufacturing, consumer and logistics and transportation services. It looks for companies “with characteristics that may deter other investors and create pricing inefficiencies that can lead to higher returns,” according to Gainline’s Form ADV.

Those characteristics could include “a storied history, unidentified or undervalued assets, complicated ownership issues, litigation or regulatory matters, identifiable cost savings, opportunities for professionalization,” the ADV said.

Earlier this year, the firm sold Source Advisors, which provides tax incentive services to accounting firms and Fortune 1000 companies globally. The firm last year invested in Atlantic Energy, an energy retailer that provides electricity and natural gas through bundles that use technology to help customers reduce consumption.