Hammond Kennedy Whitney & Co. (HKW) is one of the latest Midwest firms to charge into buyout fund-raising. The Indianapolis-based firm is seeking up to $185 million for its third fund, according to documents filed with the Securities and Exchange Commission.
The firm, which has satellite offices in New York and Chicago, expects to hold a first close on HKW Capital Partners III by the end of the year and a final close on the fund sometime next year. It is targeting mostly existing institutional investors, and is presenting to endowments, many financial institutions, funds-of-funds and some state pension funds.
HKW was founded by Paul Hammond in 1903 as a merchant bank for wealthy individuals and families. HKW ended its merchant banking services for clients in 1990, though it continutes to provide its portfolio companies with merchant banking services, mostly for mergers, acquisitions and financing
The firm began doing private equity deals in 1983 without a dedicated fund. HKW executed buyouts with outside funding until it raised a stand-alone fund. HKW’s first dedicated fund was HKW Capital Partners II, which closed in 2001 with $57 million. Many of its limited partners were pre-existing merchant banking clients of the firm. Last year the firm closed on HKW Partners II Supplemental, a $41.6 million vehicle. The firm expects the two funds to be fully invested by the end of the year
HKW acquires control positions in all of its portfolio companies. It focuses on the lower end of the middle market and targets companies that have between $10 million and $100 million in enterprise value. The firm prefers companies with annual sales between $20 million and $100 million and operating cash flow of at least $2 million, but has no such minimums for making add-on acquisitions.
HKW focuses on industrial and service companies in the United States. Portfolio companies include Robstown, Texas-based C&J Specialty Rental Tools; Maxon Corp., a Muncie, Ind.-based manufacturer of combustion equipment; and OakRiver Technology, an Oakdale, Minn.-based medical device provider.
HKW will soon open an office in Shanghai, China, mostly to help its portfolio companies source materials and products. —Matthew Sheahan