Firm: Ironwood Capital
Fund: Ironwood Mezzanine Fund III LP
Target: $300 million
Amount Raised: $307 million
Placement Agent: None
Marc Reich, the president of the Avon, Conn.-based shop, said Ironwood Capital had established an office in Birmingham, Ala., with plans to expand its activities in the Southeast. “That’s an area we’ve really targeted for this fund.”
Ironwood Capital announced this month that it has closed Ironwood Mezzanine Fund III LP at $307 million, ahead of the $300 million target that the firm had set for the pool. The firm, founded in 2001, typically cuts checks of between $7 million to $15 million to companies with revenues of $20 million or more. Reich said Ironwood Capital typically provides subordinated debt of 1x to 1.5x turns of EBITDA, with more senior debt above it in the capital stack and an equivalent amount of equity below.
As a followup to the firm’s $172 million Fund II, which closed in June 2007, the new pool provides the firm with the capital to move beyond its historical focus areas of the Northeast, Middle Atlantic and Midwest, Reich said. The firm specifically wants to seek investing opportunities in Florida, South Carolina, Mississippi, Georgia, Alabama and Tennessee.
While Ironwood Capital calls itself a generalist investor, Reich said it often focuses on companies in the fields of value-added manufacturing, environmental services, logistics and business services. The Southeast, which has a concentration of aerospace, environmental cleanup and B-to-B services companies, thus looks attractive, he said. “We view this as fertile ground.”
The firm started investing this fund last June and already has made four investments, putting $50 million to work, he said.
And as the firm has broadened its geographic reach, it also changed up its investor lineup as well, Reich said. In the past, fundraising was weighted toward insurance company investors and to a lesser extent, banks. The new fund is larger, with a broader lineup of investors, including public employee pensions, corporate pension funds, funds of funds, endowments, fraternal organizations among its 23 limited partners, he said.
Ironwood Capital set out on its capital hunt in 2011 and found the market to be receptive, if slow, Reich said. “We got into the market two years ago. We got a break. The market had started to turn in a pretty significant way” following the Great Recession of 2008 and 2009, he said. “If you have a clear strategy, a stable team and a good record, you can get funded.”