Firm Name: FRR Capital Partners
Fund Name: FRR Capital Partners LP
Co-founders: Thomas Ferguson; Robert Rosenberg
Placement Agent: None
Legal Counsel: Nixon Peabody LLP
Thomas Ferguson, previously a partner with Bradford Equities Fund, and Robert Rosenberg, who hails from his most recent experience as a principal at IndiGo Ventures LLC, have teamed up to launch a new private equity shop called FRR Capital Partners, and earlier this month, the two of them kicked off the fundraising stint for the firm’s inaugural investment vehicle.
FRR Capital Partners LP, as the fund is called, is targeted to raise $70 million from investors, though it has room to collect up to $100 million before hitting its hard-cap. In all, the fund will likely be made up of 10 to 15 limited partners including endowments, banks, insurance companies, wealthy individuals and funds of funds.
Ferguson, who has taken the role of managing partner at FRR Capital, boasts 12 years at Bradford Equities, in addition to a previous stint with Trust Company of the West, while before joining IndiGo Ventures, Rosenberg-FRR Capital’s managing director-held posts at McFarland Dewey & Co. and JP Morgan.
In addition to the two figureheads, Ferguson said FRR Capital has a team of 10 operating partners who will serve as an advisory board for the firm and take seats on the boards of the firm’s portfolio companies.
FRR Capital will focus on buyouts of already-profitable, lower-middle-market companies based in the U.S., with a primary geographic focus on the Northeastern and Midwestern states. Industry-wise, the firm is limiting itself to niche industrial manufacturers and specialty distributors of non-commodity items with revenues typically between $15 million and $50 million, and EBITDA margins of 10% or more, Ferguson said.
“It’s easier to negotiate attractive purchase price multiples in the lower middle markets,” Ferguson said, adding, “We see deal flow from contacts within the firm, which means we won’t have to participate in competitive auctions.”
The new fund, which will have the typical 10-year life cycle, is targeting an IRR somewhere in the mid-20% range, said Rosenberg.
The New York-based firm expects to hold a first close on the fund by the middle of the year, at which point it will likely add at least one junior professional to its team, Ferguson said. A final close is expected to take place by year-end 2006.
Focusing primarily on its fundraising, FRR Capital has not made any investments to date, although the firm is actively looking at opportunities and filling its pipeline, Ferguson said.
Average investments by the firm will include $7 million to $10 million in equity, an amount that might start out smaller at the beginning of buy-and-build situations, which are dependent on subsequent add-on acquisitions.
FRR tapped Nixon Peabody LLP to serve as legal counsel for the fund, and opted not to enlist the help of a placement agent. “Since we are a domestic fund, and we both have a good amount of experience here, we think our rolodex is strong enough that we don’t need one,” Rosenberg said.