Some superstars of the buyout world are putting their personal wealth into a new fund that will make acquisitions deemed too small for their respective mega-funds.
The partners of Kohlberg Kravis Roberts & Co., Texas Pacific Group and Oak Hill Capital Partners all will be limited partners in Gryphon Investors’ second fund, which sports a target of $300 million, according to a source close to the fund raising. Partners at Gryphon declined to comment on the fund raising.
If all goes according to plan, Gryphon’s roster of limited partners will read like a Who’s Who of the buyout world, including the likes of KKR founding partners George Roberts and Henry Kravis, TPG Managing General Partner David Bonderman and Oak Hill Managing Partner J. T. Crandall. The source was unclear about whether Oak Hill founder Robert Bass would be committing capital to the fund.
David Andrews, president of the San Francisco-based Gryphon, said limited partners from the larger buyout firms will refer deals to Gryphon that they consider to be too small for their own funds. The L.P.s also will help locate talented chief executive officers with ideas for platforms, Mr. Andrews said.
Merrill Lynch & Co. is the placement agent for the fund, which launched Jan. 13.
Mr. Andrews said most of the $300 million would come from institutions like public and private pension funds. He anticipates a fund wrap in the second quarter.
Gryphon’s first fund, which also had executives from KKR and TPG as limited partners, raised $80 million in 1996. The effort has invested approximately $100 million in equity over a 15-month period. One deal, made last year, was a roll-up of family dental service providers called Bright Now! The CEO who implemented the roll-up had been referred to Gryphon by a partner at TPG, Mr. Andrews said.
Most recently, Gryphon completed add-ons to platform companies in the credit card terminal, electric utility supply and security guard service industries. In December, Gryphon acquired U.S. Bancorp Rental Portfolio, a lessor of point-of-purchase credit card terminals to small businesses. It was an add-on to TASQ Technology, which distributes the terminals.
Also in December, Gryphon added two companies to its Fort Worth, Texas-based Cummins Utilities Supply, an electric utility supply distribution platform which supplies large telephone companies such as Texas Utilities Corp. and ConEdison.
KKR Partners Strike Again
Investing personal money in outside buyout funds is not new to KKR. In late 1997, more than 20 executives from the firm invested in Saddle Brook, N.J.-based Friend Skoler & Co., which targets deals valued between $20 million and $200 million (BUYOUTS March 23, 1998, p. 3).