In the fund-raising market since last summer, Parthenon Capital recently raked in nearly $500 million for a first close on Parthenon Investors II, which sports a target of $600 million.
The Boston-based firm invests in middle market companies looking for growth equity. Ernest Jacquet and John Rutherford founded Parthenon Capital in 1998 to work hand-in-hand with consulting firm The Parthenon Group, which Rutherford co-founded in 1990.
Parthenon Capital launched its first fund in 1998, targeting $250 million, and closed $100 million over target the following year (Buyouts Aug. 2, 1999, p. 5). Demand among investors to get into that fund was so great that Parthenon had to ask limited partners to scale back commitments, in some cases to $25 million from $50 million.
For Fund II, existing investors re-upped on an average increase of 60%, Jacquet says, with all returning except one corporation – Mobil, because it was acquired by Exxon last year – and one that is “still on the fence.”
New investors, which make up approximately 15% of Fund II, include Delta Airlines, University of North Carolina, University of Washington and the Sloan Foundation. Previous investors also participating this go-around include General Motors, State of Oregon, General Mills, Duke University and University of Chicago.
Jacquet, formerly with Bain Capital and Summit Partners, saw an opportunity to set up a consulting/investment strategy firm when Bain Capital moved out of the middle market and into larger transactions in the late 1990s. His idea was to ally with a consulting firm and bring its pricey services to companies that otherwise could not afford them, much the way Bain Capital used to work with Bain & Co.
At Parthenon Capital, the partners give a major part of the carry to the consulting firm in exchange for the support, proprietary deal flow and access to research.
“It’s getting services for equity, instead of services for cash,” explains Jacquet, a managing partner.
Jacquet makes it clear that Parthenon Capital is completely independent from The Parthenon Group, as opposed to being a subsidiary to the firm, like Monitor Clipper is to The Monitor Group.
In a change of pace for Parthenon Capital, earlier this month the firm joined forces with Warren Buffet‘s investment firm, Berkshire Hathaway, and Cort Furniture to launch Relocation Central, a information database company that will provide data to corporations to assist them in relocating their personnel.
Jacquet declined to provide financial details, but says his firm is an equal investor with Berkshire Hathaway and the deal came through Parthenon’s relationship with The Parthenon Group
The database company marks Parthenon’s second dip into Fund II. Last year, the firm took equity from both its funds to take Barnett, a maintenance repair distribution company, private and combine it with Wilmar Industries, a company already within Parthenon’s portfolio. Together, the companies make up the largest privately held distributor of maintenance repair and operations materials in the country. Parthenon privatized Wilmar for $300 million last May (Buyouts May 29, 2000, p. 10).