Kinderhook targets $2bn for latest flagship buyout fund

Recently rolled out by the New York manager, Kinderhook Capital Fund 8 is expected to wrap up by the end of this year, sources said.

Kinderhook Industries, a specialist in mid-market buyouts, is looking to raise $2 billion for an eighth flagship offering, sources told Buyouts.

Recently rolled out by the New York manager, Kinderhook Capital Fund 8 is expected to wrap up by the end of this year, sources said. UBS Securities is the vehicle’s placement agent.

Like many private equity firms, Kinderhook has over time been raising funds at a quicker pace. Fund 8 continues this pattern, though the target size is only moderately larger than its predecessor, closed in 2022 at $1.85 billion.

Kinderhook was founded in 2003 by managing directors Tom Tuttle and Chris and Rob Michalik, who are brothers.

Tuttle was previously with Global Emerging Markets, where he launched GEM Investment Advisors. Chris Michalik was a partner at Soros Private Equity Partners, while Rob Michalik was a managing director at Thayer Capital Partners.

The trio created Kinderhook to be a single-strategy manager focused on control investing in mid-market businesses in North America. Target companies are growth-oriented and operate in defensible niches in three core sectors: healthcare services, environmental and business services, and automotive and light manufacturing.

Preferred deal types are MBOs of entrepreneur-owned businesses, acquisitions of non-core units of public corporations and acquisitions of small-cap establishments lacking institutional support. Other strategic criteria, such as company metrics and investment range, are not known.

In a subdued deal environment, US mid-market buyouts are drawing more attention, in part because they often have attractive entry valuations and are easier to finance than large-caps. The space also offers an abundance of potential targets – roughly 200,000, according to the National Center for the Middle Market – and more opportunities for adding value.

Kinderhook has to date made more than 450 investments and follow-on acquisitions. Its latest platform deal, announced in March, involved Kaizen Collision, a regional collision repair chain.

And earlier this year, the firm said it recapitalized Compactor Rentals of America, a sustainable waste containment infrastructure provider. Among the sellers was Bestige Holdings.

Last November, Kinderhook said it closed a continuation fund set up to acquire nine portfolio companies in Funds 4 and 5. The $1.3 billion vehicle, led by Carlyle’s AlpInvest Partners, included $300 million of unfunded capital for organic and M&A growth initiatives.

Kinderhook was named one of 20 top managers worldwide on the 2023 Mid-Market Buyout Performance Ranking of HEC Paris Business School and Dow Jones.

Kinderhook did not respond to a request for comment on this story.

Chris Witkowsky contributed to this report.