PE fund briefs, week of Jan. 12, 2009

N.C. firm delays fund close

CapitalSouth Partners has extended the target closing date for its third fund a full year because of market turmoil.

The Charlotte, N.C.-based firm was set to close CapitalSouth Partners Fund III with a target of $330 million in May 2008. The firm has extended the fund-raising to May 2009, said a source familiar with the fund-raising effort. CapitalSouth, which invests in lower middle-market companies, began raising the fund in May 2007.

The firm has also raised the target to $350 million for the fund. As of Jan. 5, the firm had closed on $300 million.

No investors have reneged on previous pledges, however, and the fund has picked up several new investors, such as the Kentucky Teachers Retirement System, SunTrust Bank and HSBC, according to the source. The delay illustrates how difficult fund-raising has become for buyout firms of all sizes since the credit crunch seeped into the market in the latter half of 2007. Many larger buyout firms, such as Madison Dearborn Partners and The Blackstone Group, have reportedly cut back targets on funds.

Fund-raising for U.S. buyout and mezzanine firms fell roughly 13% in 2008 to $259.1 billion, down from $297.2 billion a year earlier.

CapitalSouth makes buyout and mezzanine investments in companies in the business services, consumer goods, health care, retail and technology sectors.

he firm has expanded its investment staff and geographic reach while raising the fund. In late 2007, Kenneth Berryman joined as a director and opened an office in Louisville, Ky., while Jay Turner signed on last year as a director to open an outpost in Dallas and source deals in the Southwest United States. T

Riverside pushes forward with North American, Euro funds

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Riverside Co. has reached its target for its fifth North American buyout fund and will likely close it at its hard cap by May 31, according to a source familiar with the fund-raising effort. The firm is also making strides with its European buyout fund.

Officials at the firm declined to comment.

The lower-mid-market buyout shop began raising Riverside Capital Appreciation Fund V early last year with a target of $900 million, which the firm reached at the end of December. The fund’s hard-cap is $1.25 billion. The fund has a management fee of 2.25%, a 25% carry fee and an 8% preferred return fee. If the fund does not produce at least a 2x return, Riverside refunds investments to LPs to the point that either their returns equal 2x or Riverside’s carry works out to 20 percent.

The European fund, Riverside Europe Fund IV, pursues an identical lower mid-market strategy in Europe. The firm is targeting $767 million for the fund and last month held a first close at $139 million. Riverside executives expect to close the fund in the summer of 2009.

Riverside has reached its North American target in the most difficult fund-raising environment in recent memory, a testament to the returns the firm has achieved on 45 exits over its 20-year history. Its previous North American fund, the $750 million Riverside Capital Appreciation Fund 2003, has generated an IRR of 19.2% and an investment multiple of 1.43x as of March 31, 2008, according to the Oregon Public Employees’ Retirement Fund.

However, the firm is not immune from market conditions. It earlier put on hiatus plans to raise a second micro-cap fund targeting $250 million because investors weren’t able to make commitments. —Bernard Vaughan

Monitor raises $500M

Monitor Clipper Partners has closed its third buyout fund with $500 million in capital commitments, according to LBO Wire. The Cambridge, Mass.-based firm had been targeting $800 million. The firm had raised about $800 million for its second fund, which closed in 2004.