High Street sets sights on fourth fund

High Street Capital intends to launch its fourth LBO fund during the first quarter with a likely target of $100 million, more than double the size of its predecessor, according to several sources.

The Chicago-based firm’s third fund, High Street Capital III SBIC, raised $40 million from one institutional investor and several high-net-worth individuals and family offices. It is expected that a “high percentage” of those limited partners will re-up in High Street Capital IV, says one source.

In addition, High Street Capital hopes to draw other institutional investors in North America and Europe to the fourth fund. The firm has hired Ariane Capital Partners, a Villanova, Pa.-based placement agency, to assist with marketing. Meanwhile, professionals at High Street Capital plan to provide about 8% of fund IV’s total capitalization, says a source.

“The hope is that fund IV will be absolutely middle-of-the-road” in terms of management fees and carried interest,” says a source, noting that the new vehicle would likely match fund III’s 2% management fee and 20% carried interest.

In a departure, the firm plans to exploit the larger vehicle to fully underwrite the equity portions of its deals, rather than sourcing transactions and then relying on equity co-investments from mezzanine firms or other buyout shops, as it has in the past. Typical equity checks written by the firm are expected to increase from $5 million to about $10 million, say the sources.

Other firms that have previously co-invested alongside High Street Capital include Bridge Street Capital Partners, GMB Mezzanine Capital and Greyrock Capital Group.

High Street Capital’s most recent acquisition closed in August 2008, with the buyout of Koontz-Wagner Electric, a South Bend, Ind.-based provider of electrical control systems that are used in the power generation and oil and gas sectors. Chicago-based mezzanine debt investor Aldine Capital Partners Inc. provided capital for the deal, as well as an equity component. —Ari Nathanson