Tenex Capital Partners III, launched last year, raised $1.2 billion in a final close in September, sources told Buyouts, finishing above a $1 billion target and a $1.1 billion hard-cap.
The cap was slightly increased by Tenex due to demand from limited partners, sources said. The final close amount also includes the general partner commitment. Acalyx Advisors was the placement agent.
LPs included endowments and foundations, family offices, financial institutions, insurers and pensions. Among them was California State Teachers’ Retirement System, which committed $100 million, and New York State Teachers’ Retirement System, which committed $125 million.
The fund is the largest yet raised by the New York private equity firm. It is 47 percent larger than Tenex Capital Partners II, which secured $814 million in 2016.
Tenex’s origins stretch back to 1999, when CEO and managing director Michael Green started up a fund to invest in underperforming mid-market businesses. Assets of the manager, called TenX Capital Partners, were acquired by Cerberus in 2004.
Green, who became a Cerberus managing director and president of Cerberus Operations, in 2010 led the spinout of a team to create Tenex. Three Tenex principals, managing directors Varun Bedi, JP Bretl and Joe Cottone, worked with Green for several years and joined him in the spinout.
Prior to becoming a PE professional, Green was for 12 years an executive with General Electric. He worked in a range of operational roles, obtaining experience in sectors like aerospace, transportation, telecom, manufacturing and software systems.
The “Tenex Effect”
Green and his colleagues brought this mix of investment and operational backgrounds to Tenex. The firm’s strategy emphasizes a hybrid operator-investor approach to making control equity recap investments in mid-market companies owned by families and management.
Opportunities are usually sourced among North American businesses with EBITDA of $5 million to $35 million, many of them commercially viable but underperforming relative to peers. Tenex invests in a variety of sectors, such as industrials, business services, healthcare, building products and auto aftermarket.
Tenex writes checks of $40 million to $100 million per platform company. Post-acquisition, it takes steps to reverse downward performance or improve on stability or growth through changes in operational efficiency, an initiative the firm calls the “Tenex Effect.”
Tenex has been active throughout this year, so far announcing two platform investments and two liquidity events. In May it backed JTM Foods, a manufacturer of handheld snack pies, and a month later invested in Belay Solutions, a virtual staffing business.
On the exit side, Tenex early in 2021 sold Custom Molded Products, a maker of pool and spa components, to Fluidra. In August it sold Wolf Home Products, a supplier of building products, to Clearlake Capital Group’s PrimeSource Brands. CMP was acquired in 2016, while Wolf was acquired in 2019.
Other senior members of Tenex’s team are managing directors Ron Lejman, Perrin Monroe and Gabriel Wood.
Tenex Capital Partners II was generating a 1.62x net multiple and a 21 percent net IRR as of March, according to a report by Employees’ Retirement System of Rhode Island.
Tenex declined to provide a comment on this story.