High Street Sets Sights On Fund IV

Firm: High Street Capital

Fund: High Street Capital IV LP

Target: Approx. $100 million

Expected Launch: First quarter, 2010

Placement Agent: Ariane Capital Partners LLC

High Street Capital intends to launch its fourth LBO fund in the first quarter of 2010 with a likely target of $100 million, more than double the size of its predecessor, several sources told Buyouts.

The Chicago-based firm’s third fund, High Street Capital III SBIC LP, closed on a total of $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 LP, a source said.

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

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

High Street Capital plans to maintain its strategy of investing in companies generating revenues up to $100 million. In a departure, however, it 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 to about $10 million from $5 million, one of our sources said.

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 provider Aldine Capital Partners Inc. provided junior capital for the deal as well as an equity component.

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

For operational reasons, the firm targets platform companies that are within a two-and-a-half hour flight from its Chicago headquarters—putting most investments east of the Rocky Mountains with a particular focus on the Midwest, a source said. Industry-wise, the firm likes health care services, outsourced business services and niche manufacturing, among others. Areas the firm steers clear of include retail and consumer products-related companies, as well as financial services and real estate.