What pandemic? How Seaside closed an oversubscribed debut fund in no time flat

Seaside Equity Partners wrapped up its inaugural fund at $160 million, providing yet another example of an emerging manager who beat the odds in a pandemic-roiled market.

Seaside Equity Partners I, officially launched in mid-2020 with an initial close in September, was done with marketing by December, managing director Andrew Thompson told Buyouts. The final close this week accommodated a single limited partner.

Fund I was originally targeted to bring in $125 million, Buyouts reported last year. The goal was revised to address demand from new investors, Thompson said, as well as some existing LPs looking to increase their commitments.

Seaside finished with “a blue-chip investor base,” Thompson said. They include State of Wisconsin Investment Board, which committed $35 million. Shannon Advisors was the placement agent.

Seaside was founded in 2017 by Thompson to be an operationally-focused investor in lower mid-market companies in the western and southwestern US. Targeting opportunities with revenue of more than $10 million and values of up to $100 million, it partners with the family owners or founders of growing companies that provide mission-critical business and consumer services.

This strategy, it turns out, was key to Fund I’s comparatively rapid pace and oversubscribed close.

Seaside got started as a deal-by-deal investor, building a portfolio of four platform companies it could showcase to LPs. As these companies (Andersen Commercial Plumbing, Outdoor Dimensions, Pebble Technology and TalentSmart) offer essential services, they continued to show “resilient characteristics” after the outbreak of covid-19, Thompson said.

Because of this, Seaside “didn’t think of delaying” Fund I’s launch, Thompson said. On the contrary, the Solana Beach, California, private equity firm was encouraged in early conversations with LPs to press ahead with fundraising and investing.

LP enthusiasm was helped along by “a lot of inbound calls about the portfolio,” Thompson said. Seaside, which focuses on “institutionalizing” companies to make them attractive to major PE and strategic buyers, is preparing for one exit and will likely do a second in the coming months.

While fundraising, Seaside added to the portfolio. It invested in Absolute Performance, a managed IT infrastructure solutions provider, and Peak View Roofing, a commercial roofing business. The deals plus several bolt-on acquisitions gave LPs more evidence of “our sourcing capabilities” and “repeatable, achievable value-creation processes,” Thompson said.

“Investors saw we were doing what we said we would do,” Thompson said. This, he noted, reinforced LP perceptions of the experience inside Seaside’s team, which also “mattered a lot.”

Thompson was previously a managing director and partner in the direct equity group of Wafra, where for more than 11 years he focused on lower mid-market acquisitions. In 2014, he set up Wafra’s West Coast office.

Other team members are principal Navid Shirazi, formerly with Golden Gate Capital; vice-president Gabe Becerra, formerly with Atlantic Street Capital; and associate Jesse Kay, formerly with Shea & Company. Managing director Bill Shen, previously an Encore Consumer Capital executive, helped establish Seaside but recently departed.

Seaside continues to recruit talent. It will this month hire another vice president, Thompson said, and expects to later in 2021 pick up a second associate.

Seaside is part of a cadre of emerging managers who did better than expected in last year’s market, Buyouts reported. The health crisis failed to stem the tide of debut fund launches and closes, above all those led by general partners and teams spun out of established managers.