More than a year after holding a $120 million first close on its third investment vehicle, middle-market buyout shop Genstar Capital recently wrapped up fund raising with a $221 million final take. The San Francisco-based firm had actually thought the process was finished in March, but then extended the offering period at the behest of an existing investor interested in committing additional capital.
Such supplemental capital, however, was not enough to help Genstar reach its official target capitalization of $250 million.
“I don’t see it as coming up short,” said Jean-Pierre Conte, a managing director with Genstar. “Our internal goal was always to break $200 million, but we were counseled to put $250 million on the cover sheet to attract pension funds.”
And, despite its surface fund-raising failure, the strategy seems to have succeeded, as Canadian pension fund manager Caisse De Depot Et Placement Du Quebec signed on as Fund III’s lead investor. Other participating limited partners include BNP Paribas, Capital d’Amerique, Credit Suisse First Boston, Invesco Private Capital, Landmark Partners, Lutheran Brotherhood Assurance Co., Meadows Foundation, Minnesota Mutual Life Insurance Co., Montreal Police Union Pension Fund, Montreal Transportation Union Pension Fund, Sun Life Assurance Co. of Canada, TD Capital and Wells Fargo Bank.
In all, approximately 25% of the $221 million was provided by pension funds, 25% from fund-of-funds, 15% from insurance companies and the remainder was split among endowments, foundations and high-net-worth individuals. Nearly 55% of the money came from investors that had also participated in the $113 million Genstar Capital Partners II, which was raised in 1996.
Conte said there would be few differences between the new vehicle and its immediate predecessor, which had concentrated on industrial diversification and away from the firm’s founding focus on pure industrial plays. Indeed, Fund III will invest in middle-market buyout opportunities in the life sciences, industrial technology and information technology sectors. It will generally seek to take controlling positions, although Fund II did feature a pair of deals BioSource International Inc. and Stream International Inc. in which Genstar received a minority stake.
So far, Fund III has already taken a controlling stake in PRA International Inc., a Vienna, Va.-based clinical research organization with approximately $120 million in revenue and 1,200 employees. The transaction was split evenly between debt and equity, with Wells Fargo Bank, Heller Healthcare Financial, Capital d’Amerique and BNP Paribas providing the debt tranche.
Also as part of the deal, previous investors The Carlyle Group, Virginia Capital and Sirrom Capital (now FINOVA Mezzanine Capital ) their stakes bought out.
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