WHI Capital posts first exit, plots fund

Partners at WHI Capital Partners recently scored their first exit and are considering raising their first fund from institutional investors.

The Chicago-based buyout 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 sale price at about $75 million. WHI Capital carved Container Recycling out of Waste Management Inc. in September 2006 for an undisclosed amount.

Since forming in 2004, WHI Capital has made six platform buys and 16 acquisitions 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 sales 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, says Adam Schecter, managing partner at WHI Capital. “It’s a big confidence-builder.”

The firm wants to achieve at least one more exit of a portfolio company 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 will likely seek to raise from $150 million to $250 million, with William Harris Investors as an anchor backer, Schecter says. The firm might start pre-marketing the fund in late 2009 and then launch in early 2010.

Schecter says that deal flow has picked up sharply in the last few months. He says that the firm is performing due diligence for three separate companies and 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 says. —Bernard Vaughan