More than a year ago, when the founders of Max Capital parted ways, the game plan was to divest at least one portfolio company per year, until the five companies in which they held controlling stakes were fully divested.
While the partners are working to divest the remaining three companies left in the portfolio, the team of Russell Greenberg, Elizabeth Burgess, Clifford Gookin, Gregory Greenberg and Alicia D’Anna have founded Altus Capital Partners Inc.
The new fund wasted no time raising its inaugural fund. Altus Capital Partners has already held a close on Altus Capital Partners SBIC Parents LP for $27.6 million. The firm is now applying for $55 million of capital from the Small Business Administration (SBA), and Greenberg expects the fund’s final close to come in June with a total of $150 million.
The fund will invest between $4 million and $10 million into each deal and should be fully invested in three to five years.
This fund is little different from the previous Max Capital vehicle, except Altus is getting capital from the SBA.
“Altus is ready to make investments,” says Greenberg, president of the new firm.
Altus’ investment strategy is to acquire profitable, small-to middle-market manufacturing businesses, offering proprietary products with annual EBITDA between $5 million and $15 million. The firm will concentrate on businesses based in the Midwest and East Coast regions of the U.S.
Altus is based in Westport, Conn., with offices in Lincolnshire, Ill., and Lexington, Ky.
The firm has not made any investments to date, but Greenberg says Altus is looking very seriously at some manufacturing deals. The firm’s investing expertise lies in buying family-owned businesses.
“I think we’re good at it. We can empathize with them and we have been successful with family businesses in the past,” Greenberg says.
Other than the SBA, investors in Altus include LPs from the principals’ prior fund including: Bank One, Madison Capital Funding LLC, an affiliate of New York Life Investment Management Holdings LLC, and The Ohio University Foundation. The fund added new investors as well. It has a total of 27 institutional investors and high-net-worth individuals.
Max Capital gained controlling interests in the five companies in its portfolio through its first – and last – vehicle, Max Capital Partners Fund, worth $60 million.
The firm’s first exit was the sale of ESCO Holding Corp., a manufacturer of aircraft launching and arresting systems, for $62 million. According to Greenberg, ESCO achieved an IRR in excess of 53% and the sale returned 71% of invested capital from the Max Capital fund during three years under Max’s ownership.
The firm’s second divestiture was the sale of Quest Specialty Chemicals, a holding company formed to acquire Royal Adhesives from Uniroyal Technology Corp., in November 2001. Royal is a manufacturer of industrial adhesives and sealants, commercial roofing adhesives and mirror mastics.
Greenberg, who served as chairman of Quest during his firm’s ownership, says the target grew 10% per year for the two years in the Max portfolio, and returned the firm nearly $11 million on a $4.7 million equity investment.
While neither seller nor buyer disclosed the total purchase price, a source close to the deal said the sale was less than $50 million.
The three remaining controlling interests still in the Max Capital portfolio are: Duramax, a specialty rubber and vinyl flooring manufacturer, Continental Structural Plastics, a maker of structural plastic parts, and Calwax Corp., which makes paraffin waxes for a variety of consumer and industrial uses.
This story originally appeared in Buyouts, an affiliated publication.