Alvarez & Marsal Capital hits $600 mln hard cap on maiden fund
NEW YORK, Feb 19 (Buyouts Magazine) - Alvarez & Marsal Capital Partners, a Greenwich, Connecticut-based buyout shop closely aligned with restructuring shop Alvarez & Marsal, has beaten the $500 million target on its debut fund with a $600 million fundraise.
A&M Capital Partners LP closed on Jan 31 after a fundraise dating back to late 2010, the year the firm was founded, according to Michael Odrich, global head of the firm and previously managing director and head of private equity at Lehman Brothers.
After holding a $174 million first close in November 2012, and after it began doing its first deals, the firm started to gain momentum with investors, to the point where in the end it had more demand for the fund than it could accommodate.
"The market has improved quite a bit as investors have gotten more liquidity back," said Odrich of the last 12 months of fundraising.
Two of the anchor investors in the fund are GoldPoint Partners, a subsidiary of New York Life Insurance Company that committed $75 million, and Oregon Investment Council, which committed $100 million.
Buyouts earlier reported that both received discounted economic terms. Oregon Investment Council, for example, negotiated a 1 percent management fee, 10 percent carried interest and 100 percent offset of transaction fees.
Other investors in the fund, whose terms were otherwise the conventional '2 and 20' and 8 percent preferred return, include Neuberger Berman, Dominion Resources ($50 million commitment) and the Texas Permanent School Fund, Odrich told Buyouts.
Over $60 million for the fund came from members of the investment team and some 220 senior professionals at Alvarez & Marsal.
Materials presented at a Dec. 5, 2012 meeting of the Oregon Investment Council noted that senior professionals of Alvarez & Marsal would be entitled to 30 percent of the fund's carried interest for deal sourcing and related services. Placement agents for the fund were Barclays Capital and Evercore Partners.
Alvarez & Marsal Capital plans to invest $20 million to $75 million at a time -- it can go far higher if need be -- to take control positions in mid-sized companies with enterprise values of $75 million to $750 million, according to its website.
Expect at least 80 percent of the capital to be deployed in North America, and up to 20 percent in European Union countries, Odrich said. Main sectors of interest include industrial, consumer products, retail, business services and healthcare, while the firm will also consider financial services and energy.
Although Alvarez & Marsal is known as a turnaround consultant, its associated buyout shop isn't searching for highly distressed companies as a rule, said Odrich.
Instead, the firm is looking for underperformers that can benefit from an operational overhaul, that are going through management changes or are in need of capital to fund growth or acquisitions.
It plans to pursue corporate carve-outs as well as consolidation strategies. According to Odrich, the firm has access to the more than 2,000 professionals at Alvarez & Marsal, who can bring their expertise to bear in deal sourcing, due diligence and improving the performance of portfolio companies.
"There's nothing like it in the market," said Odrich of the fund and its resources. "That's what got me excited about joining and getting behind this business."
Alvarez & Marsal Capital lists nine professionals on its website, including Odrich; Jack McCarthy Jr, managing director, and Kurtis J. Kaull, managing director. Michael Bardorf is the chief financial officer.
Two portfolio companies listed on the site are Gabriel Brothers, a chain of deep discount stores, and Atlantic City Linen Supply, a provider of commercial laundry services.