MCM Capital Closes Second Fund
MCM Capital Partners Announces Initial Closing Of Second Private Equity Fund
Top Quartile Performance Sets Stage For Smaller Middle-Market Acquisitions
October 2004
CLEVELAND, OH – MCM Capital Partners, a Cleveland, Ohio-based private equity firm and a leading investment firm dedicated to investing in smaller middle-market businesses, is pleased to announce the initial closing of MCM Capital Partners II, L.P. (“Fund II”), its second institutional fund and third overall pool of investment capital.
Approximately $47 million of capital has been committed to Fund II to date from investors, including financial institutions, universities, fund of funds, family offices, and high net worth individuals. Virtually all investors from MCM Capital Partners, L.P. (“Fund I”) committed to Fund II, and the General Partners have invested their personal resources – an amount substantially in excess of Internal Revenue Service and partnership agreement requirements – on a side-by-side basis with the Limited Partners.
The General Partners of Fund II, which include Mark E. Mansour, James C. Poffenberger III, Steven M. Ross and Gerard R. Weimann, will utilize capital committed to Fund II to identify and acquire controlling equity interests in North American smaller middle-market manufacturing, distribution and service businesses.
Fund II represents the Firm’s second institutional fund and third overall pool of capital since its founding in 1992. Between 1992 and 1997, MCM’s principals funded the acquisition of six companies on a deal-by-deal basis (“pre-fund deals”), generating over a five-times cash on cash return and a 41 percent gross internal rate of return (“IRR”) for their investors.
The performance of MCM’s pre-fund deals sparked market demand for an institutional fund and, in 1998, culminated in the formation of Fund I. To date, Fund I has generated a 27 percent gross realized IRR for its investors via four liquidation events. The General Partners expect at least one additional liquidity event within the coming 12 months among the four platform companies that remain in the Fund I portfolio. They also anticipate that the final rate of return for Fund I will place it well into the upper quartile of vintage 1998 private equity funds.
Bolstered by returns generated since the Firm’s inception, the General Partners successfully raised Fund II in less than a year. The initial closing of Fund II coincides with the completion of Fund I investments in new platform companies.
“We achieved success with Fund I and our pre-fund transactions by maintaining a disciplined investment strategy,” said Mansour. “I am extremely pleased that some of our new investors include nationally recognized universities, as well as CEOs of Fund I companies, evidencing their confidence in our investment principles and strategies.”
Fund II will target companies with annual sales of $20 million to $100 million and management teams that have demonstrated their ability to grow sales, both organically and/or through strategic acquisition, consistently improve operating performance and generate superior cash flows. The General Partners anticipate investing capital in Fund II in seven to ten companies over a period of three to five years.
“The smaller end of the middle market best suits MCM’s strengths,” said Ross. “Our extensive deal sourcing network provides us with superior access to the 30,000-plus companies that populate this niche. Additionally, transaction inefficiencies within the smaller end of the middle market have enabled MCM to acquire equity interests in companies at lower purchase price multiples than would otherwise be possible within the middle market.”
“Our investors continue to demonstrate their belief in us,” added Weimann. “We have completed 13 transactions and have realized seven liquidity events. Based on empirical market data, our returns have consistently been in the top quartile, and our gross IRR has been over 35 percent since our founding in 1992.” Weimann, who joined MCM Capital as its Senior Operations Partner in 2003, was formerly the CEO of Advanced Ceramics, a MCM Capital portfolio company which was sold to General Electric in 2002 and yielded a double-digit cash on cash return for MCM’s investors.
Working in conjunction with the General Partners to add value to investments are a board of advisors consisting of prominent current and former corporate executives, including: Jack Kahl, President, Jack Kahl & Associates, and Founder and former Chief Executive Officer, Manco, Inc.; Morry Weiss, Chairman and former Chief Executive Officer, American Greetings Corporation (NYSE: AG); Don DeFosset, Jr., Chairman and Chief Executive Officer, Walter Industries, Inc. (NYSE: WLT); John Mariotti, Chief Executive Officer, The Enterprise Group, and former President of Rubbermaid Office Products Group; and Timothy J. Callahan, President, MCT Corporation. MCM’s founders include: A. Malachi Mixon, III, CEO, Invacare Corporation (NYSE: IVC); Joe Callahan, former CEO, Swagelok; and Ernie Mansour, Managing Partner, Mansour Gavin & Manos, LLP.
“We provide portfolio companies a unique opportunity to leverage the expertise and insight of CEOs who have run multi-billion dollar operations through membership and involvement on their corporate boards,” said Poffenberger. “These executive investors have helped Fund I companies define avenues for growth and ensure a successful journey down those paths. For Fund II companies, this represents value to a degree that most in the middle market couldn’t otherwise attain.”
