The Denver private equity firm this month filed Form D fundraising documents for Mountaingate Capital Fund II and parallel vehicles, indicating a target of $400 million. No commitments were secured as of the date of the filing. Atlantic-Pacific Capital is the placement agent.
Fund II is seeking roughly the same amount raised by Mountaingate’s inaugural fund. Fund I closed in 2017 at its $395 million hard-cap, ahead of a $300 million target.
Mountaingate’s Fund I emerged in May 2016 as a replacement to KRG’s Fund V, according to Form D documents. KRG Capital Fund V, rolled out a year earlier with a target of $500 million, collected just under $150 million before being rebranded as a Mountaingate offering with a new and smaller target.
A tender offer process in 2015 was meant to help capitalize KRG’s Fund V, Buyouts reported. A deal that year allowed Pennsylvania Public School Employees’ Retirement System to sell an interest in KRG’s Fund IV to Ardian, who then made a small commitment to Fund V. A similar offer was expected to be made to other Fund IV LPs, the report said.
It is not clear if Fund V capital obtained through the secondaries process flowed into Mountaingate’s inaugural fund. Mountaingate in 2017 said the pool was backed in part by a group of “legacy” KRG LPs.
Mountaingate declined to provide a comment.
From KRG to Mountaingate
KRG, founded in 1996, appears to have been planning for a major transition through Fund V due to significant changes in the firm’s leadership.
In 2013, several senior principals left KRG, among them co-founder and managing director Mark King, who left to establish Revelstoke Capital Partners. These personnel losses created challenges to bringing Fund V to market, Buyouts reported. Another factor, the report said, was the sub-par performance of some funds.
Remaining KRG executives, including co-founder and managing director Bruce Rogers, steered Fund V’s launch and Mountaingate’s subsequent formation. They also gave Mountaingate a strategy that is broadly comparable to KRG’s, though adjusted to core sectors and a lower mid-market focus.
Mountaingate makes control investments in growth-oriented opportunities in business services, marketing services, specialty distribution and specialty manufacturing sectors, according to its website. Using a buy-and-build approach, the firm partners with management teams to turn companies with EBITDA of $5 million to $25 million into larger ones.
Mountaingate oversees a portfolio of nine platform companies, three of them added in recent months. They are Acceleration Partners, an affiliate marketing agency; BioDerm, a maker of disposable medical devices and wound-care supplies; and Relevate Health Group, a provider of marketing products and services to healthcare clients.
Another portfolio company, Inventus Power, a rechargeable power systems business, is an investment of KRG’s Fund IV, closed in 2007 at $1.96 billion. Mountaingate jointly manages Fund IV with KRG executives.
Other senior members of Mountaingate’s team include managing directors Stew Fisher, Colton King and Bennett Thompson. All three previously worked with Rogers at KRG.