Aside from sociopaths, private equity pros are probably the only ones that perk up when they hear the words “committed” and “institution” in the same sentence-albeit for completely different reasons.
One such happy firm is Roark Capital Group. After four years of raising capital on an as-needed basis, Roark, earlier this month, closed its first institutional investment vehicle. Roark Capital Partners LP received a warm welcome from investors, raising a total of $413 million on a $300 million target. The Atlanta, Ga.-based private equity firm tapped Lazard Freres & Co. as placement agent for the new fund.
Twenty-five institutional investors, including Princeton University, Harvard University, Hamilton Lane, Goldman Sachs, ATP, Parish Capital and Commonfund Capital, provided the vast majority of the new vehicle’s commitments. About 90% of the total capital collected is from U.S.-based investors, Neil Aronson, a managing partner at Roark told Buyouts. At least 35 accredited investors made commitments to the fund, according to the firm’s Form D filing.
The old cliche “time is money” was the main decision-making factor for Roark to make the transition from raising capital on a deal-by-deal basis to having dry powder at its disposal. “The reason that we did this is because it gets to be too time-consuming to source deals, raise capital, conduct diligence, work through investor documents and convince the sellers and advisors that we can get the money to close a deal,” Aronson said.
Aronson, referring to “horror stories” about today’s fundraising environment, said Roark was hunkered down for what it expected could have been an 18-month fundraising drive. But when the rubber hit the road, Roark raised the new fund in about six months, holding a first close in December with about $300 million in commitments already in hand.
The firm will continue with its time-tested practice of writing $10 million to $150 million equity checks for companies with revenues between $20 million and $500 million.
Equity from the fund, which had a $5 million minimum investment limit, will be invested in franchises, financial services providers and niche manufacturing companies headquartered in the Southeast, Aronson said. Roark’s current portfolio companies include Carvel, Cinnabon, Seattle’s Best Coffee International, FastSigns, Money Mailer, Pike Family Nurseries and United States Arbitrate Finance II. The firm’s sweet spot is in businesses that require a $20 million to $60 million equity investment.
Industries more or less precluded from Roark’s investment mandate include biotech, healthcare, pure technology and telecom. “Those are all good spaces to invest in, but they are industries that you have to live in every day. We couldn’t just pop in one of them and feel comfortable,” Aronson said.
He added that the firm is just now picking up its head to see what deals are out there for the new fund and that the closest deal in the pipeline is about three months from completion.