WHI Capital Posts First Exit, Plots First Fund

Partners at WHI Capital Partners recently scored their first exit and are thinking about raising their first traditional buyout fund.

The Chicago-based firm sold Container Recycling Alliance, a company that operates eight glass recycling facilities, to Strategic Alliance, a glass processor owned by Willis Stein & Partners, another Chicago buyout shop. Reports have pegged the price tag at $75 million. Adam Schecter, a managing partner at WHI Capital, said partners from WHI Capital and Willis Stein had been talking about the deal for about two months.

WHI Capital carved Container Recycling out of Waste Management Inc. in September 2006 for an undisclosed amount. GMB Mezzanine Capital provided $7 million of senior subordinated notes and $500,000 in equity to support that deal.

Since forming in 2004, WHI Capital has made six platform buys and 16 acquisitions total when including add-ons. The firm seeks to make control investments in North American companies in niche manufacturing, distribution and specialty services. Targets generate $10 million to $100 million in revenues and $2 million to $10 million in EBITDA. The firm typically writes equity checks of between $5 million and $15 million.

Getting this first exit was crucial, Schecter said. “It’s a big confidence-builder.”

The firm wants to ring up at least one more exit and establish more of a track record before seeking to raise a conventional buyout fund. To date, William Harris Investors, a family asset management firm that manages more than $1 billion, has been the Chicago-based LBO shop’s sole backer, providing an evergreen fund of about $100 million.

WHI Capital would likely seek to raise around $150 million to $250 million, with William Harris Investors as an anchor backer, Schecter said. The firm might start pre-marketing the fund in late 2009 and then launch in early 2010.

Schecter said deal flow has picked up sharply for his firm in the last few months. It is into the due diligence stage for three separate companies and seriously researching five other deals. By contrast, three months ago the firm was not in active due diligence, and was only looking at a handful of intriguing deals, Schecter said.