*Veritas Capital raised last fund in 2010
*DC Capital launched in 2007
*Both target government contractors
By Steve Gelsi
NEW YORK, June 4 (Reuters-BUYOUTS) - Beltway deal-making
specialist Veritas Capital Management LLC and a firm started by
some of its former executives, DC Capital Partners LLC, appear
poised to refill their coffers at a time of merger pressure
among companies doing business with the U.S. government,
according to sources.
Neither firm has publicly disclosed a fundraising target.
New York-based Veritas Capital is talking to limited partners
about launching Veritas Capital Fund V, which would be its first
fund since the 2012 death of Robert McKeon, the founder and
former chairman of the firm, according to a person familiar with
the fundraising effort. The firm raised $1.3 billion for Veritas
Capital Fund IV in 2010.
Meantime, Alexandria, Virginia-based DC Capital is talking
to investors about re-starting a $350 million fundraising effort
cut short by the 2008 financial crisis, according to a separate
source familiar with the firm.
With the U.S. military and other government operations
facing cutbacks because of federal budget sequestration and
other issues, consolidation among contractors has been expected,
particularly among mid-market companies.
Last year, Veritas Capital was one of four firms capturing
the highest possible score of 1.0 in a performance ranking by
the alternative-asset data provider Preqin, joining Inflexion,
Vista Equity Partners and Wynnchurch Capital Partners. Each of
these firms had three funds ranking in the top quartile by
vintage year, according to Preqin.
Veritas Capital has been active on the deal trail of late:
In April, its portfolio company, SI Organization, set plans to
buy QinetiQ North America Services and Solutions Group, a unit
of the British company, for as much as $215 million. And in
February, the firm completed its $383 million deal to buy
telecom components maker Anaren Inc. Veritas Capital took Anaren
private for $28 a share in cash, beating out a rejected offer of
$23 per share from Vintage Capital Group.
Meanwhile, DC Capital is re-launching its inaugural buyout
fund dating back to the early days of the firm in 2007. Thomas
Campbell, founder and president of DC Capital Partners, worked
as a partner and co-founder at Veritas Capital from 1992 until
2006, according to his profile on the firm's website. Douglas
Lake, Jeffrey Weber and T. Gail Dady, all partners at DC
Capital, also worked at Veritas Capital.
DC Capital has made no public statements about the sources
of capital for its portfolio, which includes seven companies and
two realized investments, according to its website. It is not
uncommon in the private equity world for more seasoned
executives to invest their own money to establish a track record
before raising money from institutional investors. Some private
equity firms also raise money for investments on a deal-by-deal
basis under a strategy known as the fundless sponsor model.
In April, DC Capital sold a $125 million payment-in-kind
toggle note for its engineering portfolio company Michael Baker
Corp; the proceeds were earmarked to pay the firm a dividend,
according to a published report. The PIK deal, which reflects
healthy corporate debt markets, came less than a year after DC
Capital completed the $397 million acquisition of Michael Baker
Corp through its affiliate, Integrated Mission Solutions. The
merged company, Michael Baker International LLC, had more than
5,000 employees and $1 billion in revenue at the time of the
deal's close in October.
Calls and emails to both firms were not returned.
(Buyouts Magazine is a Thomson Reuters publication. Editor: