Insight Snags $312.5M For Buyouts, $99M For Mezz

Firm: Insight Equity Holdings LLC

Fund: Insight Equity II

Amount Raised: $312.5 million

Target: $500 million

Fund: Insight Mezzanine Fund I LP

Amount Raised: $99 million

Target: $250 million

After less than a year of marketing, Insight Equity Holdings LLC has pushed past the halfway point in the fundraising effort for its second buyout fund. According to a regulatory filing, the Southlake, Texas-based turnaround shop has closed on commitments totaling $312.5 million for Insight Equity II LP, which has a $500 million target.

The firm has gathered pledges from 18 investors, including Los Angeles Fire and Police Pensions, which made a $12 million commitment to Fund II, as previously reported in Buyouts. Insight Equity is also out in the market with its first mezzanine debt fund, Insight Mezzanine Fund I LP, and it closed on $99 million in pledges for that pool, which has a $250 million target, in June.

UBS is acting as the placement agent for both funds, which were each launched in the fall of 2008. Insight Equity is commiting 10 percent of the capital for the vehicles, amounting to $50 million for Fund II and $25 million for the mezzanine pool.

Founded in 2002, Insight Equity raised its first proper institutional fund in 2005. That vehicle, Insight Equity I LP, closed at its $250 million target. According to a board document from Los Angeles Fire and Police Pensions, the first fund has performed quite well, ranking in the top percentile of similar funds with a net IRR of 87 percent and a 2.5x total value multiple. StepStone Group, a private equity consultant for the LP, did express some concern, however, about the extent of Fund I’s portfolio that is yet unrealized.

But this trepidation was allayed by StepStone’s findings that five Fund I portfolio companies are in sales processes expected to return capital to investors over the next two years, the document said. In addition, two Fund I portfolio companies are scheduled to pay dividends during the next 12 months, the document said. Current Fund I portfolio companies include Atwood Mobile Products, an Elkhard, Ind., supplier of appliances and other products for recreational vehicles; Meadow Valley Corp., a Phoenix-based builder of highway bridges, overpasses and airport runways; and Superior Silica Sands, a Kosse, Texas-based producer of sand products for construction usage.

Management fees for Fund II are the standard 2 percent but the firm is getting a bit creative with carried interest, employing a graduated scale based that rises along with returns. The carried interest rate starts out at the usual 20 percent but escalates to 25 percent or 30 percent given gross returns of 2.5x and 4.5x, respectively.

Insight Equity traces its roots to Bain & Co. Co-founders Ted Beneski, Conner Searcy and Victor Vescovo all worked there prior to striking out on their own. The firm looks to invest in North American-headquartered businesses with annual revenue of between $50 million and $1 billion. Sectors of interest include manufacturing, automotive and transportation, aerospace and defense, industrial and consumer goods, distribution, and energy services.