Seidler Holds Final Closing on Fund III with $260M

Seidler Equity Partners last quarter held a final close on its third mid-market buyout fund, taking in $260 million altogether for Seidler Equity Partners III, Buyouts has learned.

Christopher Eastland, a principal with the firm, says that all of the fund’s institutional investors from its second fund returned for the third, including family offices, endowments and foundations and insurance companies. The firm does not have any public pension limited partners. Seidler Equity Partners II closed in 2002 with $120 million. The firm closed its inaugural fund in 2000 with $55.5 million. Documents filed with the Securities and Exchange Commission say that the fund has 25 investors, and that the fund required a minimum investment of $500,000.

The Los Angeles-based firm plans to takes controlling interest in lower middle-market companies operating in niche markets, often based in the Los Angeles area. Thanks to a fund more than twice the size of its predecessor, the firm has expanded its investment range to consider companies generating revenues of between $15 million and $200 million per year, and EBITDA of between $4 million and $30 million. It invests throughout the United States, and will consider the occasional deal in Europe; one of its portfolio companies is based in the Netherlands. The firm traditionally holds companies between five and seven years.

Central to the firm’s strategy is to avoid auctions, which Eastland acknowledges are becoming much more common throughout the middle market. For now, Seidler says that all of its deals come through individual contacts or referrals. “There’s a strong pull for funds that have a good but short track record to raise a lot more money because it’s available,” says Eastland. “That forces you to put big chunks to work and do more deals. There are a lot of good companies out there but it’s hard to find them, get through to them and convince them that you have what they’re looking for.”

More of Seidler’s limited partners are expressing an interest in doing co-investments, Eastland says. However, he says the new fund’s size should enable Seidler to depend less on co-investments and consortiums to get things done than in the past. Indeed, Eastland says that in the end, what LPs want is for their GPs to put their money to work as wisely as possible. He does not foresee any conflicts over LP co-investment demands.

Seidler’s portfolio includes companies from a variety of industries, including gaming companies, office accessory providers, medical suppliers and specialty chemical manufacturers. The firm’s portfolio includes Los Angeles-based health club company L.A. Fitness; Sarasota, Fla.-based medical product providers Paragon Medical; and Winder, Ga.-based screen print industry servers Amscomatic. While Seidler generally avoids traditional media investments in companies in radio or television, it counts five publishers of yellow pages and telephone directories among its companies.

Peter Seidler and his brother Robert Seidler founded the firm with Eric Kutsenda in 2000. The firm has seven investment professionals, in-house legal counsel and an operations partner in addition to administrative staff. — M.S.