Monomoy spinout Middle Ground Capital prepares debut fund

Three executives from Monomoy Capital Partners who left last year have formed their own shop that will have a heavy emphasis on operations, sources told Buyouts.

Ex-Monomoy Partner John Stewart, Directors Scot Duncan and Lauren Mulholland left the firm and have formed Middle Ground Capital, sources said. Middle Ground is still in its early stages of formation, but one person with knowledge of the effort said the firm is expected to launch its inaugural fund soon.

No official target is set, but the person with knowledge said the firm could try to raise up to $350 million. Also, it’s not exactly clear what kind of strategy Middle Ground will pursue.

Stewart declined comment. Erica Bartsch, a spokeswoman for Monomoy, declined to comment.

Stewart and Duncan both have extensive operating experience in their backgrounds at Toyota. Stewart spent years as a manager at Toyota, according to his LinkedIn profile. He joined Monomoy in 2007 and was made partner in 2016. He rose to co-lead private equity investments and also was head of the operations group, he said in his profile.

He is joined by Duncan, who started at Monomoy in 2008, prior to which he also worked at Toyota, involved in engineering and production, an archived version of his profile shows. Mulholland, who joined Monomoy in 2011, rounds out the team. Before Monomoy, she was an associate at Macquarie Group.

Monomoy, meanwhile, closed its third fund on $767 million in 2016, beating its $650 million target. The firm raised $400 million for its second fund in 2011 and $280 million for its debut fund in 2007.

Fund II was generating a 1.8x multiple and a 54.7 percent net internal rate of return as of Sept. 30, 2017, performance information from California Public Employees’ Retirement System shows.

Monomoy was formed in 2005 by Stephen Presser, Justin Hillenbrand and Daniel Collin, who spun out of KPS Capital Partners. Collin and Hillenbrand are co-chief executive officers of Monomoy, while Presser is a partner.

Spinout activity was strong last year, even as fundraising for first-time managers dipped. Executives considering spinning out are tempted by the strong fundraising market, sources have told Buyouts.

“There’s never been a better time to spin out, split off and hang out your own shingle and try to raise capital,” said a limited partner who tracks new firms. “LPs are willing to step out on the risk curve and experiment with new shops.”

Action Item: Check out Monomoy’s Form ADV here: https://bit.ly/2HupOC7

Leeroy Poulter of France drives his Toyota during the 12th stage of the Dakar Rally 2016 in Cordoba province, Argentina, January 15, 2016. REUTERS/Marcos Brindicci