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McNally Capital co-invests in Federal Data through its family-office network

  • Investment: $15 mln to $30 mln in family run businesses
  • Strategy: Co-invests in deals with family offices in its network
  • Whom to contact: Ward McNally [ward@mcnallycapital.com]
  • Why this is important: Family office networks are active in direct investment space.

McNally Capital, the family office of the McNally family, co-invested in Federal Data Systems, which provides infrastructure and services to the Department of Defense and the national intelligence community.

The deal marks McNally’s sixth co-investment since Ward McNally founded McNally Capital in 2008.

The investment in Federal Data was made in partnership with Christopher Oates, founder of RimLight LLC and Nio Advisors and a former director at O2K Worldwide Management Group.

Oates is an investor in and a director of Veritone Inc, the artificial-intelligence company. Other co-investors include Profile Capital Management and Pine Crest Capital, according to a news release.

The McNally family wealth comes from Rand McNally & Co, at one time the world’s biggest mapmaker.

The family decided to divest its majority stake and the company was sold piecemeal to various investors in 1997. It completed the process by selling off the core mapmaking business to AEA Investors, founded by the Rockefeller, Mellon and Harriman families.

McNally Capital has a merchant-banking division that provides investment services and advice to family offices on their transactions. It co-invests with other family offices through its family direct capital division.

Other than McNally, key personnel in direct investing include Frank McGrew, ex-Raymond James managing director, and Adam Lerner, who co-leads the direct-investing efforts.

McNally Capital works with a network of more than 700 family offices for its co-investment opportunities.

The family office invests $15 million to $30 million in U.S.-based companies with Ebitda of $5 million to $15 million. It picks up control or minority investments in aerospace, business services, staffing, agriculture and food, water and energy and industrial manufacturing.

For example, in 2017, McNally’s deal for Dedicated Computing came through a family office investor in its network, and it partnered with Two Roads Group, which had expertise in industrial technologies. McNally also leveraged its family office network to make introductions to prospective original-equipment-manufacturer customers.

McNally co-invested with another family office, Coughlin Capital, to acquire ITS Logistics in 2015.

Other companies in McNally’s portfolio include Genesys Aerosystems, Europa Sports Products and Advanced Micro Instruments Inc.

The company declined to comment.

Action Item: Read more on McNally Capital here https://www.mcnallycapital.com/