Kevin Mitchell, who formed Lariat Partners in 2013 alongside Jay Coughlon, is moving back to his roots in the independent sponsor world.
Mitchell, who mutually decided with Coughlon to parts ways earlier this year, is reactivating independent sponsor shop RedCloud Capital, which he started in 2004.
RedCloud focuses on entrepreneur-led businesses in the lower middle market, targeting companies with Ebitda between $3 million and $10 million. The firm focuses on investments in business and environmental services, consumer products, value-added distribution and food & agriculture sectors.
“I made a decision to go back to focusing on the lower middle market, where RedCloud [was] always successful,” Mitchell told Buyouts.
Mitchell and Coughlon raised $118 million for Fund I in 2014. Mitchell said Lariat has one more investment to exit, Ecoserv, an environmental cleaning and waste disposal services provider that has held “preliminary sale discussions.”
Prior to forming Lariat, Mitchell ran RedCloud with Sam Simpson, who formerly worked as chief executive officer of Stewart’s Beverages. Simpson is still on board as a managing director, as well as Vice President Josh Sartisky, who formerly worked at Lariat.
RedCloud works closely with entrepreneurs to help them scale their businesses, Mitchell said.
“Most of these entrepreneurs are very successful in their own way, but they get to a point where they don’t want to risk all their own capital anymore,” Mitchell said.
“One of the things we bring to the table in every deal is we help them develop more of a strategic selling effort, where we have to develop an external effort or hire salespeople, develop a value proposition and actually go find who would be the ideal customer,” Mitchell said.
RedCloud is confident in its ability to reenter a competitive independent sponsor market, largely in part because of the experience of its team, who have worked with traditional private equity funds and independent sponsors.
“We were an independent sponsor before that terminology ever came into play. I don’t think that term even existed in 2004,” Mitchell said. “We spent 10 years developing our business model as an independent sponsor. We’re very entrepreneurial, we have a small team, we can make decisions quickly, we’re very adaptable and can move quickly.”