Editor’s Letter: Spinout activity keeps rolling in strong fundraising market

  • Two new firms formed with support of parent organization
  • LPs look to seed new managers
  • Spinout activity looks strong so far this year

Since last year I’ve basically become a new firm/spinout reporter because of all the stuff going on in that side of the market. That has kept up this year, with several interesting firms popping up.

Earlier this month, I reported on two groups that have come out of larger parent organizations and are just getting started looking for money. Interesting about these two new firms: They both are getting some level of support from their parent organizations as they start their independent lives.

First up is Gallant Capital Partners, formed by two ex-Gores Group executives, Jon Gimbel and Anthony Guagliano. Gallant had been in the works for a few months and was formed with the support of Alec Gores. Gallant is working with Park Hill Group to raise $300 million.

Alec Gores has a minority stake in the new firm and is committing to the debut fund, which gives the new firm a leg up on other first-time shops in that it has a strong name behind it as an LP.

This shop comes out of Gores, which is itself going through significant changes. Check out my story on Gores here.

Next up is a new firm with a name I will have trouble pronouncing for years to come: Nonantum Capital Partners.

This firm is being launched by ex-Charlesbank Managing Director Jon Biotti, alongside Charlesbank Principal David Ganitsky and ex-Bain Capital Credit Managing Director Nicholas Nomicos. Nonantum is targeting $250 million with a $350 million cap.

Nonantum is a Native American word for “blessing” as well as the name of some sort of village situation in Massachusetts. Look it up … apparently people in Nonantum have their own language.

The firm is getting a lot of attention in the market. Here is another situation where the larger organization, Charlesbank, is supporting the launch. I’m not clear on the relationship, but sources said Nonantum is being launched “in collaboration” with Charlesbank.

These two firms are starting life with advantages over others who are launching totally on their own. The support of their larger organizations gives them heft when talking to LPs, even if it simply means they can tout their track records free and clear.

And larger organizations that take minority stakes in management companies in exchange for back-office support get a stake in what could be the next superstar firm.

LPs are interesting in spinouts as well, and not just as passive investors. A report from Chief Investment Officer said three large organizations — Alaska Permanent Fund, Wafra Group and UK Railways Pension Scheme — are teaming up to invest $1 billion to seed six new managers.

The article said Ashby Monk, a Stanford University professor who is consulting with the group, made the disclosure at the investment committee meeting of California State Teachers’ Retirement System this week.

“From the outside looking in, I say, ‘Oh my gosh, a seeding platform backed by these huge pools of capital, they’re going to able to negotiate incredible fee structures, and they are pulling name-brand individuals out of name-brand general partners, and getting aligned structures,’ and yet when it comes to the board, it’s hard,” Monk said, according to the article, talking about the need for the three organizations’ boards to approve the plan.

Spinout activity has been strong, and from all reports it looks like it will continue to be active this year. LPs want to back the next superstar manager and smart organizations are finding ways to share some of the economics in exchange for helping new firms launch.

Hopefully, the market correction we’re currently living through doesn’t ripple over into the PE fundraising world, which could derail some of these plans.

Private Equity Editor Chris Witkowsky reflects at home. Photo by Wendy Witkowsky