Milestone Partners Nears Close On Third Fund

Firm: Milestone Partners

Fund: Milestone Partners III LP

Target: $200 million

Placement Agent: None

Milestone Partners is set to close its third buyout fund near its hard cap of $240 million this month or next, a source familiar with the fundraising told Buyouts.

The St. Davids, Penn.-based lower mid-market buyout shop recently held a third closing at $174 million on the fund, which has a $200 million target. The expected size of Milestone Partners III LP would mark a hefty increase from that of the firm’s $120 million second vehicle raised in 2005.

Though considered a third fund, the latest effort is Milestone Partners’s second pool funded by institutional investors, including the Pennsylvania Public School Employees Retirement System and Parish Capital Advisors. The firm did not employ a placement agent to help it raise the fund, which charges standard “2 and 20” management fees.

Milestone Partners invests $5 million to $25 million in deals valued between $15 million and $100 million. It prefers backing companies with a three-year track record of profitability, with enterprise values of between $10 million and $100 million, generating revenues of between $10 million and $100 million, and EBITDA between $3 million and $15 million. Sectors of interest include manufacturing, distribution, natural and organic products, and service sectors. Milestone Partners typically holds companies between four and seven years.

The firm has been on a bit of tear this year, even as many other firms have curtailed deal-making given the credit crunch. It’s made five investments, including three out of Fund III in June: Safemark Systems LP, an Orlando-based company that provides in-room safes and locking systems to hotels; Café Enterprises Inc., a Taylors, S.C.-based owner of a restaurant chain in the Carolinas, Tennessee, Georgia and Virginia; and Global Connection Inc., an Atlanta, Ga.-based company that provides pre-paid telephone services.