Mill Road Capital Sets $525M Target For Fund II

Mill Road Capital, a company that takes toe-hold positions in public companies with the aim of taking some of them private, has started raising money for its second fund, Mill Road Capital II LP. According to disclosures made with the Securities and Exchange Commission, the firm had an initial close with $126 million in commitments. The fund’s initial target is $525 million.

Based in Greenwich, Conn., Mill Road Capital was founded in 2004 by Thomas Lynch, a former executive from The Blackstone Group, who brought several of his colleagues with him to the firm.  

Its unusual strategy has been to partner with small-cap companies that are publicly listed, with the long range goal of taking some of them private. Often, according to the firm’s Web site, Mill Road Capital buys large blocks of shares from existing shareholders.

The strategy has paid off handsomely. The firm’s debut fund, Mill Road Capital LP, a 2007 vintage fund, was returning a net IRR of 26 percent, and a gross return multiple 1.7x as of Dec. 31, 2010, according to a source familiar with the firm.

Among the firm’s portfolio companies are Rubio’s, a popular Mexican fast-food restaurant based in Southern California, and Destination Maternity, one of the world’s largest designer and retailer of maternity apparel.

So far, according to the firm’s Web site, Mill Road Capital has invested in more than 40 companies spanning areas such as consumer retail, restaurants, manufacturing, business services and consumer products.

Triago was acting as placement agent for a portion of the firm’s fundraising efforts.