Toronto Shop Closes Fund IV Short Of Target

Having just closed its fourth buyout fund well below the original target, Toronto-based Imperial Capital Corp. is already looking ahead to its next vehicle.

The firm, which invests in the middle market in both America and Canada, closed Imperial Capital Acquisition Fund IV on July 23 with commitments totaling C$126 million ($116.4 million), far short of its original target of C$350 million. Founder Stephen Lister told Buyouts he was pleased to raise that much, given the difficult environment.

“We walked into the worst fundraising market in the history of the capital markets short of the Great Depression,” Lister said.

Lister expects to be back in the market to raise the firm’s fifth fund in the next 24 to 36 months. Imperial Capital didn’t employ a placement agent for Fund IV but will likely hire one or more for select markets when raising Fund V, Lister said.

Fund IV had secured pledges of C$110 million by the end of May. Imperial Capital lost a number of institutional investors this time around, Lister said, but supplemented them with more than 100 wealthy individuals from Canada and elsewhere.

Institutional investors in Fund IV include Bank of Montreal, CIBC, Kensington Capital Partners, a Toronto-based fund-of-funds; and Nesbitt Burns, a Toronto-based boutique investment bank. Terms on the fund are the industry standard “2 and 20.”

Lister and his team are targeting investments in what they refer to as non-cyclical consumer products, items such as food, skin care and cosmetics, as well non-cyclical business services, such as warehouses and engineering consultants. Typical equity checks for the shop are C$20 million to C$50 million.

Imperial Capital closed on its first investment with the fund in December with the purchase of Schulman Associates, a Cincinnati, Ohio-based company that protects human subjects in pharmaceutical medical trials. Schulman Associates reviews research protocols and consent documents from clinical trials to evaluate compliance with regulations protecting people who work as subjects in the trials.

Lister founded Imperial Capital in 1989. He was formerly president of Startups Inc., a company he founded to provide equity financing and consulting assistance to high growth, early stage companies. The firm has nine investment professionals.