Wealthy Parent Gives Fidelity Equity A Fast Start

Mutual fund colossus Fidelity Investments wants to cash in on the buyout business, and to do so it’s putting its own money into the pot.The Boston-based money manager quietly launched Fidelity Equity Partners earlier this year, staking two LBO veterans to $500 million collected from various pools of Fidelity capital. The new firm is led by Brooke Ablon, formerly with the well-funded microcap buyout shop The Riverside Co., and Nick Martin, a former partner of HgCapital, the European buyout firm. For the firm’s principals, not having to answer to dozens of limited partners—as Riverside must, for instance—is just one of many points of differentiation for the new mid-market specialist. “We do not have fundraising issues,” Ablon said. “So as a firm there is no need and necessity to sell out positions to provide our LPs with cash returns or to provide us with the ability to raise another fund. The capital is also very flexible in terms of where we are investing in the capital structure and how long we hold companies.”Having a deep-pocketed sponsor also means that Fidelity Equity Partners has access to additional money if needed to expand its range beyond that of a typical $500 million fund. “If we saw something we really liked that was outside of our current size mandate, a few phone calls and a few hours’ notice should be enough to get us access to the capital that we need,” Martin said. “It’s a fairly compelling proposition.” Fidelity Equity Partners also can bring its parent’s resources to bear in deal sourcing, portfolio company operations, and in providing a global reach for portfolio companies. The industries in which the firm plans to invest—financial services, software, health care and media—all fall either in areas where the partners have completed deals or where Fidelity’s panoply of divisions already operate.“While we are a financially driven fund, we can provide strategic-like resources in terms of intellectual capital and networks of executives that other buyout funds can’t,” Ablon said.The only deal the firm as completed to date, the acquisition of Asset Control LLC in April, illustrates the firm’s approach to deal flow. Asset Control provides data management for financial-services companies and counts Fidelity Investments as a client. The buyout firm teamed with Fidelity Ventures, the VC arm of Fidelity Investments, to purchase Asset Control for an undisclosed sum. Fidelity Equity Partners owns a majority share of the Asset Control, Ablon said.The new buyout shop is a successor to Fidelity Capital Investors, a value fund that made control and growth-stake investments with $200 million under management. Fidelity Equity Partners has inherited two portfolio companies and has been given a mandate to seek out more aggressive opportunities.The firm will seek out companies valued at between $50 million and $150 million in North America and Europe. Its European office, led by Martin, should be in full swing this fall.—J.H.