SunTX Capital Partners LP, a Dallas-based middle market buyout shop, held a $120 million first close on the SunTX Fulcrum Fund Dec. 31. The fund is expected to close with $130 million in commitments by mid-year. And SEC document lists the target at $400 million.
SunTX Fulcrum Fund will make leveraged acquisitions and take controlling positions in middle-market companies in the U.S. Sunbelt region. Targeting companies with annual revenue of $30 million, the fund will invest between $10 million and $25 million in each portfolio company, using a mix of debt and equity instruments. The firm has identified 63 target industries, described by SunTx Chief Operating Officer and General Partner Ned Fleming as, “fragmented, large and growing”
“They’re old economy and traditional economy companies, with assets we can leverage to create an attractive capital structure,” he says. The firm’s investment strategy is strictly regional, limited to the Southern United States. “It’s the fastest growing region in the country, and from a private equity market standpoint, it’s an untapped region.”
In late January the firm teamed up with BancBoston Capital and Harlingwood Equity Partners to acquire Interface Security Systems LLC, a St. Louis-based alarm company. The terms of that deal were not disclosed.
Colorado Public Employees’ Retirement Association (CoPERA) has allocated $15 million to the fund and will have a seat on the fund’s advisory committee. CoPERA has invested alongside Bain & Co., Crescent Diversified, the pension funds of MM Services and Shell Netherlands and the University of Chicago’s endowment. The fund’s general partners – Fleming,Todd Boyd, Richard Boyle, Craig Jennings and Mark Matteson – will invest $6.5 million of their own capital in the fund.
Boyle and Fleming created SunTX 10 years ago, raising capital to finance middle-market buyouts on an as-needed basis. SunTX Fulcrum Fund is its first formal fund and it marks the first time the firm has solicited capital from limited partners. The team began raising capital in 2001, but pulled the fund off the market after Sept. 11 and lowered its expectations from an original target of $400 million.
Along with a 2% management fee and an 80%/20% carried interest split, the fund also carries a clawback agreement. Half of the fund’s profits will be rolled into a subsequent fund.
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