Pfingsten Partners Closes Third Equity Investment Fund –

After fund raising for 18 months, Pfingsten Partners LLC has closed its third fund, Fund III, with $284 million, which exceeded its original target of $250 million. Pfingsten will continue to acquire middle-market manufacturing, distribution and specialty publishing companies.

Fund III looks very much like Pfingsten’s last fund. There are only two slight differences. Fund II, which closed in 1998, was only $100 million and its LP base was limited to the U.S. Part of the new fund’s strategy was to broaden its institutional investor base both domestically and overseas. Fund II is fully invested and Pfingsten is already divesting portfolio companies from the fund.

Limited partners in the new fund include Pantheon Ventures Inc., ATP Private Equity Partners (Denmark), HarbourVest Partners, National Railroad Retirement Investment Trust, DuPont, WestLB Asset Management, LLC, Thrivent Financial for Lutherans, West Midlands Pension Fund, INVESCO Private Capital and HSBC Capital.

“The size of the companies we are investing in are the same as our last fund and the sectors are the same. We will probably do less co-investment because we have more capital,” said Thomas Bagley, a senior managing director with Pfingsten Partners. “The only difference really is that this is the first time we raised money overseas, and that’s part of the reason for being oversubscribed.”

The fund expects to invest in eight to nine platform companies with transaction values of $25 million to $100 million for manufacturing and distribution companies, and $10 million to $50 million for specialty publishing companies. The partnership for this fund is 10 years. Despite having foreign limited partners, Pfingsten will only be investing in the U.S.

Although the sectors Pfingsten invests in don’t really mesh with each other, they are the sectors that the Deerfield, Ill.-based firm has always invested in. “This is where we have our operational experience. The sectors don’t have to go together,” said Bagley. “They are also good sectors to be in. We are coming out of a recession period and the economy is improving, and opportunities in these areas are increasing.”

While Fund III has yet to make any investments, it does have letters of intent out to two manufacturing companies. “We expect the deals to close in May. They are both clearly right in our target,” said Bagley.