Moelis spinout NexPhase Capital rolls out third fund with $750m target

Led by managing partner Ted Yun and founding partner Kurt Larsen, NexPhase spun out of Moelis in 2016 and closed its debut fund two years later.

NexPhase Capital, founded by ex-principals of Moelis Capital Partners, is back in the market with its latest lower mid-market buyout offering.

The New York private equity firm recently filed Form D documents for NexPhase Capital Fund V, indicating a target of $750 million. Atlantic-Pacific Capital is the placement agent.

Fund V is, in fact, the third in a series of NexPhase vehicles. Its name refers to the fifth pool overseen by the team begun in 2007 at Moelis Capital, the PE arm of Moelis Asset Management.

Capital raising has recently become tougher for PE GPs of all types and sizes. Proliferating fund products in a crowded marketplace are meeting with reduced supply due to overallocated LPs.

The result is a slower pace of fundraising, at least compared with last year’s robust activity. In the first half of 2022, 417 funds secured nearly $255 billion, according to Buyouts data, down 18 percent from a year earlier.

Led by managing partner Ted Yun and founding partner Kurt Larsen, NexPhase spun out of Moelis in 2016 and closed its debut fund (Fund III) two years later at $361 million. A second vehicle (Fund IV) followed in 2021, raising $544 million with the backing of LPs like Connecticut Retirement Plans and Trust Funds and New York State Common Retirement Fund.

Ken Moelis, the billionaire founder of Moelis & Company and affiliates, committed to both NexPhase pools, a 2020 SEC filing shows.

NexPhase was set up to build on the strategy forged at Moelis. It makes operationally focused control investments of $40 million to $150 million in lower mid-market companies in North America, typically with EBITDA of up to $30 million. These are sourced in industry verticals well-known to the firm’s team: consumer, healthcare and software.

Target businesses tend to be entrepreneur-led, asset-light and growth-oriented, with a 5 percent to 25 percent organic expansion rate and the potential to accelerate. Post-investment, NexPhase investment and operating professionals support incremental growth using the NPC Value Creation Playbook.

NexPhase’s team has made more than 90 investments, including add-on acquisitions, according to the firm’s website.

Today, active platform investments total 14, two of which were added this year. They are Aztec Software, a provider of online learning systems for adult education, and Tubby Todd, a provider of body care basics for infants with sensitive skin.

Four investments were made last year, among them Metz Culinary Management, a custom dining-management service company. NexPhase also sold portfolio assets, including OmniSYS, a technology solutions provider to the retail pharmacy industry, acquired in 2013 under the Moelis banner.

Before NexPhase-Moelis, Yun was a partner with Prospect Hill Growth Partners, while Larsen was a managing director at Cerberus Capital Management. Other partners, Jamie Kaufman, Andy Kieffer, Joel Killion, Bob Gartland and Lex Leeming, all previously worked at Moelis.

NexPhase declined to provide a comment on this story.