HKW Zeroes In On $185 Mil. Target

Firm: Hammond Kennedy Whitney & Co. Inc.
Fund: HKW Capital Partners III LP
Target: $185 million
Amount Raised: Undisclosed
Placement Agent: Bass Creek Advisors Ltd.

Mid-market specialist Hammond Kennedy Whitney & Co. Inc., having just about reached the $185 million target for its third fund, plans to continue taking commitments up to $200 million—a goal it expects to reach by the end of the year, a source with knowledge of the vehicle told Buyouts.

The Indianapolis-based firm launched the vehicle, which would be roughly double the size of its predecessor, HKW Capital Partners II LP, in the fourth quarter of 2006. It targeted mostly existing institutional investors, but also made its case to endowments, funds of funds and some state pension funds. Prior investors include Goergen Foundation, John Hancock Mutual Life Insurance Co., Indiana State Teachers’ Retirement System and National City Equity Partners. Fund III has a minimum investment of $5 million.

Closing the fund will cap off a busy two years for the firm, which sold eight companies during that time and has already bought three companies using Fund III capital. Earlier this month, Honeywell announced that it would acquire Maxon Corp., a Hammond Kennedy Whitney & Co. portfolio company. Honeywell agreed to pay $185 million for the Muncie, Ind.-based manufacturer of combustion burners and gas valves. The deal is subject to closing conditions and regulatory review and is expected to close in December. The portfolio company was purchased with the buyout shop’s second fund.

Hammond Kennedy Whitney & Co. specializes in the lower end of the middle market, acquiring U.S. industrial and service companies generating annual revenues of between $20 million and $100 million and operating cash flow of at least $2 million. Its portfolio companies include Aero-Metric Inc., a map and three-dimensional model manufacturer based in Sheboygan, Wis.; Nesco LLC, a Bluffton, Ind.-based company that sells and rents equipment to the electric utility industry; and Seneca Enterprises Inc., a label maker for motor oil containers, foil-wrapped beverage containers and other food products, based in Franklin, Pa.

In 1983, the firm began doing buyout deals without a dedicated fund, a practice it continued until 2000. Counting all its deals from the “fundless” days as its first fund, the firm set out to raise its first institutional fund under the banner HKW Capital Partners II LP. It raised $57 million in 2002 and then reopened the fund in 2005 before closing on roughly $100 million.

The buyout shop has also put out its first shingle overseas. Last year, the firm opened an office in Shanghai, China to help its portfolio companies source parts and products. It also has offices in New York and Chicago.—J.P.