Odyssey Investment Doubles Dry Powder

Firm: Odyssey Investment Partners

Fund: Odyssey Investment Partners IV LP

Amount Raised: $1.5 billion

Target: $1 billion

Hard Cap: $1.5 billion

Placement Agent: Credit Suisse Securities LLC

The $1.5 billion close of Odyssey Investment Partners IV LP on March 9 may be one of the more successful fundraisings in recent history.

In a market where limited partners are leery of substantial increases to fund size and many general partners have been hunting down commitments for more than a year, mid-market firm Odyssey Investment Partners was able to double the size of its predecessor fund in a little more than seven months.

Even more impressive, the target for Fund IV was $1 billion but investor demand ended up exceeding the vehicle’s $1.5 billion hard cap, Stephen Berger, chairman of Odyssey Investment, told Buyouts.

The larger fund will allow Odyssey Investment, which has offices in New York and Los Angeles, to take bigger stakes in its own deals. When the firm was investing from its $750 million third fund, it often closed larger deals that required an equity co-investment from its larger LPs.

“Even though we were a $750 million fund, we were doing deals like a $1.2 billion fund,” Berger said. “The main difference now is that we’ll be investing more from the core fund with fewer co-investments.”

Berger said that just about all of Fund III’s limited partners re-upped their investment in Fund IV, though he declined to name particular investors. Public meeting minutes, however, disclosed a $30 million commitment from the San Francisco Employees’ Retirement System, while the School Employees Retirement System of Ohio committed up to $40 million to the new investment vehicle.

A regulatory filing for the fund said Fund IV carried a $10 million minimum investment threshold. Credit Suisse Securities LLC served as placement agent for the fund.

To date, no investments have been made with Fund IV, which will be used to acquire companies with annual EBITDA between $20 million and $80 million.

Odyssey Investment’s third fund made its final platform investment on Dec. 29 with the $119.6 million acquisition of management consulting firm SM&A. Fund III still holds seven of the nine total investments it made, including Wastequip Inc., a maker of waste handling and recycling equipment, and York Insurance Services Group Inc., a third-party provider of administrative services for the insurance industry.

Even though much of Fund III’s capital is still locked up, the fund has made some strong returns. Last May, Odyssey Investment sold Norcross Safety Products LLC, a maker of head-to-toe protective equipment for workers, to Honeywell International Inc. for $1.2 billion. Odyssey Investment had acquired Norcross Safety in the summer of 2005 for $495 million, including the assumption of debt, or about 7.7X its 2004 adjusted EBITDA of $64.4 million, according to an article that appeared in Buyouts at the time.

Berger declined to comment on Norcross Safety’s return figures, noting only that is was a “terrific deal.”

The other Fund III exit was 2007’s sponsor-to-sponsor sale of construction equipment rental company Neff Corp. to Light Year Capital for $900 million. Odyssey Investment acquired Neff in 2005 for about $510 million. Declining again to disclose particular returns, Berger simply dubbed that deal “a great one.”