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Gridiron wraps up fourth flagship buyout fund at $1.35bn hard cap

Fund IV is the largest fund in Gridiron's 15-year history, exceeding by 59 percent the $850 million collected four years ago by Fund III.

Gridiron Capital, a buyout shop that prides itself on its entrepreneurial roots, secured $1.35 billion in the final close of a fourth mid-market offering.

Gridiron Capital Fund IV finished at its hard cap, 38 percent above a $975 million target. It is the largest fund in the New Canaan, Connecticut firm’s 15-year history, exceeding by 59 percent the $850 million collected four years ago by Fund III.

A mix of new and existing global limited partners signed up to Fund IV, managing partners Tom Burger and Kevin Jackson told Buyouts. They include pension systems like Illinois State Board of Investment, Los Angeles Fire & Police Pension System and Santa Barbara County Employees’ Retirement System.

Fund IV was on the fundraising trail for roughly 18 months, bringing in about 75 percent of committed capital prior the outbreak of covid-19, Burger said. Ironically, the pandemic’s economic fallout gave Gridiron “a chance to shine,” Jackson said, in large measure due to the resiliency of its portfolio.

Gridiron makes control-stake investments in three core North American sectors: branded consumer, B2B and B2C services and niche industrial. Target companies in select sub-sectors, typically with EBITDA of $8 million to $50 million, are sourced thematically by Gridiron, with a focus on characteristics like high cash flows, light assets and scalability.

These characteristics, Jackson said, helped the portfolio persevere as the health crisis got underway. Burger agreed, noting Gridiron “didn’t have to dive into a lot of problems” in the portfolio. It was instead able to “capitalize on the work we’d done” and “be more offensive.”

This is reflected in Gridiron’s deal pace in 2020. Its transactions include four platform investments, among them AML RightSource, an anti-money laundering and compliance solutions provider. AMLRS was acquired from Clarion Capital Partners.

Gridiron was founded in 2005 by Burger, a former Butler Capital Corp managing director, and senior advisor Gene Conese, a long-time C-level executive. Both had considerable experience as owner-operators that was channeled into the design of Gridiron’s strategy. Burger said this background gave the firm “empathy for family- and founder-owned businesses.”

Gridiron helps grow its portfolio companies by relying on the Gridiron Playbook, a collection of “repeatable processes used time and time again,” to achieve measurable success, Burger said. Gridiron’s 20-person investment team is supported in its value-creation efforts by nine operating partners and a network of executives.

The strategy has resulted in a strong track record. Gridiron Capital Fund III is a top 2015-vintage performer, according to Pitchbook, generating a 3.67x net multiple and a 52.88 percent net IRR as of July 2020.

Fund III perhaps received a boost from this year’s sale of Dent Wizard, an automotive reconditioning services provider “doubled in size” since its 2015 acquisition, Jackson said. Gridiron subsequently invested in the company’s buyer, Dealer Tire, a Bain Capital-owned automotive replacement tire and parts distributor.

Fund IV will maintain the strategy, Burger said. It will utilize a larger capital pool to invest in a greater number of companies relative to the past and “play towards the top end of Gridiron’s size range.”

Fund IV is already about 50 percent deployed, accounting for five platform and six add-on investments, including those made this year. The vehicle’s inaugural deal, closed in 2019, was Colibri, an online learning specialist.

Gridiron’s other 2020 investments include Cubii, a maker of fitness equipment and wellness solutions. The firm also acquired GSM Outdoors, a developer of branded accessories for the hunting, sport shooting and outdoor enthusiast markets. The seller was Sentinel Capital Partners.

Jackson was an associate with CCMP Capital before joining Gridiron in 2010.

Action item: See Gridiron Capital’s investment overview here.