Rising Sun Capital raises new buyout fund: Firm also opens in Shenzhen, China

Sun Capital Partners may not often do large deals, but it sure does a heck of a lot of them. And the Boca Raton, Fla.-based firm this month closed a new fund to do many more deals.

Sun closed its Sun Capital Securities Fund LP – Tranche II at $935 million in commitments. It’s a non-control, evergreen fund that reinvests profits. The securities fund lets Sun invest more in public situations and other types of transactions that are still within the realm of distressed and turnaround.

The domestic and international limited partners in it included university endowments, funds-of-funds, pension funds and family offices and trusts.

The fund was targeted at $700 million. Sun raised the first tranche in 2004 for $300 million.

Last year alone, Sun was active as it was involved in 30 deals. One of the more noteworthy was the $1.2 billion buyout of Mervyn’s, a Target Corp. subsidiary, from a consortium that consisted of Sun Capital, Cerberus Capital Management, Lubert-Adler and Klaff Partners.

So far this year, Sun Capital has already pulled the trigger on six deals. Its most recent deal is the buyout of highly engineered polypropylene-based fabrics LINQ Industrial Fabrics Inc. from American Industrial Partners earlier this month.

And it’s not just deal making either that’s keeping the firm active. In the last year, the firm has raised more than $2.4 billion in two different funds. LPs last year committed $1.5 billion to Sun Capital Partners IV.

Sun also this month opened an office in Shenzhen, China, which will help it with sourcing and vendor relationships. Sun now has offices in Boca Raton, New York, Los Angeles, London and China.

“China touches a lot of our businesses. We could improve things by getting feet on the ground,” says Rodger Krouse, co-CEO and co-founder of Sun.

But the middle market, turnaround deal specialist, though it is swelling in size, is careful to put limits on where and how it wants to invest. Take China for example. Sun doesn’t want to expand into China by buying troubled companies there. Krouse says that the deal environment isn’t ready yet for its kind of distressed transaction in China.

“Other countries are more developed than China in their treatment of distressed companies,” he says. “In China, the banks continue to support troubled companies which otherwise would need to address liquidity problems with investors like us.”

Despite its recent fund-raising success, Sun insists it will stay planted in its niche. The company’s last two transactions were for companies with $59 million and $79 million in sales. The firm likes, in the words of one of its pros, “simple turnarounds” that don’t have many layers of management and multiple stages-something easier to find with bite-sized deals.