PE fund briefs, week of July 7, 2008

Milestone aims for $240M third fund

Milestone Partners has raised more than $103 million in commitments from 38 investors for its third fund, according to a regulatory filing. The Pennsylvania-based lower mid-market firm has targeted Milestone Partners III at $240 million. The limited partners are undisclosed.

This is Milestone’s second time raising money from institutional investors. Lead investors in its second fund included the Pennsylvania Public School Employees’ Retirement System and Parish Capital Advisors. Its prior fund was $88 million and closed in 2004.

The firm invests in such disparate companies as apparel makers, performance enhancement product sales, auto parts makers, natural foods products and pizza restaurants. Milestone has already purchased three companies out of its new fund. It bought Fatz Café, Safemark Systems and Global Connection of America in June. Its deal for Safemark Systems, which was announced last week, used a debt facility and co-investments from Madison Capital and New Canaan Funding.

Milestone Partner Brook Hayes declined to comment. —Erin Griffith

Beecken Petty nears close on fund III

Health care-focused firm Beecken Petty O’Keefe & Co. expects to close its $650 million third fund in the third quarter, says a source familiar with the fund-raising effort.

The source says that the Chicago-based firm won’t stray from its strategy of mid-market buyouts in the health care industry, though the firm will be equipped to cut slightly larger equity checks.

The firm has already raised $400 million for the fund, according to regulatory filings. Investors in the fund include Twin Bridge Capital Partners, a Chicago-based fund-of-funds and co-investment firm.

The new fund, Beecken Petty O’Keefe & Co. Fund III, marks a hefty increase from its previous fund, a $325 million vehicle which closed in 2005. Beecken Petty O’Keefe raised its first fund, $150 million vehicle, in 1997.

The firm’s sweet spot is investing between $50 million to $75 million in companies generating $10 million to $30 million of EBITDA.

Beecken Petty O’Keefe will also occasionally invest in growth-stage companies with enterprise values between $5 million and $50 million in the health care services, medical products and information technology industries.

Beecken Petty O’Keefe’s investment mandate covers a wide swath of the health care industry. Areas of interest include specialty distribution, with a focus on pharmaceutical-related companies and businesses such as surgery centers and psychiatry services clinics that provide medical care outside of hospitals.

The firm also focuses on health care outsourcing companies that provide contract management, staffing, billing and other services. In addition, the firm targets hospices, institutional pharmacies and managers of pharmacy benefits programs, as well as companies that manufacture medical and dental instruments.

Beecken Petty O’Keefe has completed three deals so far this year. The most recent was its acquisition of Sterling Healthcare, a hospital services outsourcer that it bought last month from Resurgence Asset Management.

Beecken Petty O’Keefe also was among a slew of private equity firms that sold CryoCor Inc., a company that makes health care supplies, in May to Boston Scientific Scimed for $17.2 million. In January, the firm bought Valitas Health Services Inc., a company that provides clinical contract staffing and related health care management services, for an undisclosed amount.

Duff Capital buying hedge fund

Investment firm Duff Capital Advisors announced last week that acquired hedge fund group North Sound Capital.

The firms, both located in Greenwich, Conn., did not disclose terms of the deal.

For Duff Capital, which launched in March with the goal of raising between $1 billion and $1.5 billion to seed investment strategies, this marks its second hedge fund investment.

North Sound, which specializes in buying and selling stocks short, has endured several rocky years. Assets have shrunk from $2.9 billion in 2006 to $1 billion now. Tthe deal is a chance to join forces with Philip Duff, a Wall Street veteran with a track record of growing investment firms.More recently, Duff has been better known for having grown hedge fund group FrontPoint Partners into a $5.5 billion organization. Morgan Stanley, where Duff was once CFO, bought FrontPoint in 2006 for about $400 million.

Duff and North Sound founder Tom McAuley once worked for Tiger Management, run by legendary hedge fund investor Julian Robertson. —Thomson ReutersHorsley holds final close

Horsley Bridge Partners has closed its ninth general fund of funds with just under $1.8 billion. Limited partners include the Indiana Public Employees’ Retirement Fund and Railways Pension Trustee Co.

Its previous general fund closed on about $1 billion in 2005.