Mason Wells has lock on Midwest

The upper Midwest gets no love, when it comes to private equity. Even though about one-fourth of the U.S. GDP comes from the broadly defined upper Midwest, only about 12% of the nation’s private equity capital stems from the same region.

So claims Thomas Smith, principal at Milwaukee-based Mason Wells, which has raised Mason Wells Buyout Fund II with $300 million in commitments. “The Midwest is an under-served market. There’s more deal opportunities in this region than equity capital that’s raised here,” Smith says.

The firm’s first fund had $175 million in capital commitments. Targeted industries are engineered products and services, specialty packaging and paper and outsourced business services, which will need to have between $15 million and $40 million in equity capital and sales of between $50 million and $250 million. Mason Wells manages about $500 million in buyout commitments and $50 million in venture.

At $300 million, fund II is believed to be the largest fund ever raised in Wisconsin. LPs include AXA Equitable Life Insurance Co., Bank of Scotland, BP America Inc., Green Bay Packaging Inc., Key Capital Corp., Prudential Capital Partners, St. Paul Travelers Cos., SunTrust Equity Partners and the School Employees Retirement System of Ohio.

During fund-raising – in working with placement agent Forum Capital – the two main selling points were the firm’s contacts in the region’s middle market, and its history of working together. Of the team’s five partners, four have worked side by side for 15 years.

The firm focuses on the 10-state region bordering or near to the Great Lakes. This, Smith says, is another key to the firm’s success as it differentiates itself from coastal firms that often turn down the typical family-owned businesses of the region. “We don’t fly in from across the country, lob a letter of intent, kick tires, then say, This isn’t what we’re looking for,'” he says. “A family owner isn’t accustomed to a lot of people coming in, asking a lot of questions and then walking out the door with a lot of information.”

The firm’s knowledge of the area also gives them an occasional edge on sourcing, getting to deals before there is an auction process. In fact, auction processes are often shunned altogether in the region.

Case in point, he says, was when the firm bought family-owned Converting Inc. last year, the first investment out of fund II. The Clintonville, Wisc.-based manufacturer, which had about 170 employees at the time of the November deal, makes disposable paper products such as napkins and cups. Senior financing on the deal came from the former parent of Mason Wells, M&I Marshall & Ilsly Bank.

Smith, a former banker at Great Lakes area advisory shop Robert W. Baird, is a fan of the region, referring to its, “strong work ethic and straight forward approach to business.” Smith thinks Mason Wells is also known for being straightforward, having bought companies every time it issues a letter of intent.