Schroders & Associates Canada, the Canadian affiliate of U.K.-based Schroders PLC, rang in November with a first close on $110 million for its third buyout fund.
The firm began raising money for Fund III at the beginning of the year and expects to hold a final close when it reaches between $180 million and $200 million, or the month of March – whichever comes first, said Paul Echenberg, chief executive of Schroders Canada.
Limited partners that have committed to the fund include the Ontario Teachers Pension Plan Board, the Caisse de Depot et Placement du Quebec and NB Capital Partners Inc., as well as a number of European and U.S. institutions.
The fund has a general focus, but will look for companies that represent some type of niche, be it a market niche, a product niche or a geographic niche, as long as it has something that distinguishes it from its “brethren,” Echenberg said.
“We look at a lot of deals that are me too’ companies that are operating very well, but don’t have anything special about them, so we tend not to invest in them,” he added.
Schroders Canada raised its last fund in 1994, but set up shop in Canada in 1987. The investment strategy for the latest fund will mirror the strategy of Fund II, except the firm now plans to target slightly larger deals. Echenberg said Schroders Canada had begun to do this toward the end of Fund II.
The firm will invest between $10 million and $30 million in each transaction, focusing primarily on Canadian companies, although American companies might be considered. Schroders Canada might also co-invest in American deals with its U.S. affiliate and will likely make U.S.-based add-on acquisitions.
Out of Fund III, Schroders Canada has closed one deal and has inked another.
The firm committed an undisclosed amount in June to MatraPlast, which extrudes polycarbonate and polypropylene.
There are very few companies in North America that perform the exact same function as MatraPlast, giving it a strong market niche in a large area.
Separately, pending closure, Echenberg declined to provide detailed information on the signed deal, but said his firm has agreed to purchase a 51% stake in an auto parts company. Measuring on the high end of Schroders Canada’s investment scale, the firm enlisted a European co-investor as a partner. The deal is slated to close by the end of the month.
The company has a very strong technological niche, Echenberg said.
“They’re organized very uniquely in the fact that they are more vertically and horizontally integrated than the typical supplier and their competitors,” he added.
Echenberg called both of these deals “exactly representative” of the kinds and sizes of deals that are to be expected from Fund III.
Previous Schroders Canada deals include Richelieu Hardware, a national supplier of kitchen cabinet and decorative metal products, and Supremex, a printing products manufacturer.