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Sunday, 26 May 2013 22:00

$500 million in hand, Detroit private equity firm looks west

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Chris Sheeren Chris Sheeren

GRAND RAPIDS — Flush with a half-billion dollars of new capital, one of Detroit’s most established private equity firms has begun looking aggressively for its first-ever deals in West Michigan, according to one of the firm’s partners.

Huron Capital Partners LLC, which raised $500 million over a three-month span in late 2012, has begun searching for investment and acquisition opportunities among lower-middle market companies in the Grand Rapids area, Chris Sheeren, a partner at Huron Capital, told MiBiz. The Detroit-based PE firm is targeting West Michigan as well as a half-dozen other metro markets as it looks to deploy the capital it raised for its new Huron Fund IV.

“West Michigan is an attractive opportunity,” he said. “We like the diversity of industry on the west side of the state — no one industry is overly dominant, and you have a nice variety of businesses. We also think there’s a good fit culturally with what we’re about (at Huron Capital).”

Sheeren cited the region’s food, furniture and burgeoning medical device industries as particularly attractive industries, noting that Huron Capital has made multiple investments in those industries. He also praised West Michigan’s spirit of entrepreneurship.

Any investments would come from the 14-year-old PE firm’s fourth investment fund, the Huron Fund IV, which is its largest yet. Its previous fund, the now-closed $350 million Huron Fund III, invested in 10 platform companies and eight add-on acquisitions. Since 1999, Huron Capital has raised more than $1.1 billion and made investments in 63 companies.

Huron Capital typically invests in niche manufacturing, consumer product, business services and distribution companies across a wide range of industries including health care, education, food and the automotive aftermarket, among others. The firm does not invest in the “five Rs,” as Sheeren calls them: real estate, restaurants, retailers, resources (e.g., energy) or reimbursable-based companies involved in billing or collections.

Huron Capital targets established companies with annual revenues between $20 million and $200 million and earnings before interest, taxes, depreciation and amortization (EBITDA) of at least $5 million. It looks to make a majority investment and partner with the management team to build the business with a “five-year mindset” toward a liquidity event, he said.

“We’re definitely medium-term investors, which gives us the luxury of not worrying too much about quarter-to-quarter variations and lets us concentrate on what’s the best way to build revenue and increase earnings,” he said.

While its newest fund is bigger than each of its predecessors, Huron Capital will continue to invest in the same size deals, Sheeren said. That will probably translate into 14 “platform companies,” plus strategic add-on acquisitions for those platform investments, he said.

Huron Capital hopes to close on 10 investments in 2013 and similar numbers annually over the next few years. While there is no specific metric for the number of deals that could be done here, Sheeren said, “I would love for at least a couple of those to be in West Michigan.”

The firm does have some West Michigan connections. Three of Huron Capital’s partners — John Higgins, David Reynolds and retired Herman Miller executive Charley Vranian — hail from the west side of the state, and Vranian lives in Grand Rapids.

Huron also invested in Southfield-based Ross Education LLC, which has medical education schools in Grand Rapids and Portage.

“It’s not that we haven’t looked here,” he said. “It’s more that we’ve now identified (West Michigan) as a hole in our map … which is one of the reasons we’re redoubling our efforts here.”

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Brian Edwards

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