Gryphon Investors returns to market with sixth flagship fund, targets $2.7bn

Gryphon Investors is back on the fundraising trail with a sixth, lower-mid-market buyout vehicle only 10 months after closing its predecessor.

Gryphon set a target of $2.7 billion for Gryphon Partners VI, which has yet to secure commitments, according to a Form D fundraising document.

If the goal is met, the fund will be the largest in the San Francisco private equity firm’s 25-year history. It will be 29 percent larger than Fund V, which wrapped up in mid-2019 at a $2.1 billion hard cap.

Fund V was backed by asset managers, endowments and foundations, high-net-worth families, insurers and pension plans, most of them US-based. Disclosed limited partners include Community Foundation of the Chattahoochee Valley, ICG Enterprise Trust and Montgomery County Employees’ Retirement System.

Gryphon is also marketing a separate pool, Gryphon Heritage Partners, which is seeking $650 million. The purpose of the vehicle and its relationship with Fund VI is not known. The firm declined a request for comment.

Gryphon was founded in 1995 by CEO and managing general partner David Andrews, formerly an executive with Oak Hill Capital. The firm specializes in making control-stake investments in North American companies with EBITDA of up to $50 million focused on business services, consumer products and services, healthcare, industrial growth and software.

Those five industry categories reflect specific characteristics of interest to Gryphon, such as high fragmentation, high growth, recession resistance and demographic change, according to the firm’s website. Gryphon’s investment team is organized around the five categories.

Fund VI is expected to maintain the strategy, generally investing $100 million to $300 million in target businesses through buyout, leveraged build-up and growth equity deals.

At present, Gryphon’s portfolio holds 22 companies, three of them added this year. They are Ncontracts, a Brentwood, Tennessee, provider of risk management software to the financial services industry; Pacur, an Oshkosh, Wisconsin, supplier of packaging materials to the medical device industry; and PestRoutes, a McKinney, Texas provider of software for pest control businesses.

Gryphon also is preparing to sell a portfolio company, PE Hub reported in January. An auction was expected to be launched soon for CORA Health Services, a Lima, Ohio, outpatient rehabilitation specialist acquired in 2016. It is not clear if the current coronavirus-spurred downturn is impacting that process.

Andrews leads a team of more than 50 professionals, including 16 partners with responsibilities in Gryphon’s industry and operations resources groups.

Gryphon late last year closed a second junior debt fund, Gryphon Mezzanine Partners II, securing $300 million. The pool will participate on a minority basis in portfolio-related debt financings.

Gryphon Partners IV, closed in 2015 at $1.1 billion, generated a net IRR of 22.4 percent as of June 2019, according to Preqin data.

Action Item: Check out Gryphon Investors’ ADV filings here.