GRAND RAPIDS — Blackford Capital plans to spend 2016 raising money for a new private equity fund that will seek to build off the success of its first fund and invest in Michigan-based companies.
The Grand Rapids-based private equity firm aims to raise between $100 million and $150 million from investors for its Michigan Prosperity Fund II. Blackford Capital is now in the beginning stages of fundraising and hopes to close the new fund by the end of 2016, Managing Director Jeff Helminski told MiBiz.
“We’re out in the marketplace talking to not only our existing investor group, but folks that we’ve gotten to know over time,” Helminski said. “We have a lot of interest. We expect it to go well and are confident.”
For the first Michigan Prosperity Fund, Blackford Capital raised $50 million from high net worth individuals and family offices. To solicit investments for what could be triple that amount for the second fund, Blackford Capital will have to look beyond those familiar sources, Helminski said.
Fund II will seek financial backing as well from institutional investors such as pension funds, foundations, and university endowments that weren’t the “right fit” for the structure of the smaller first fund.
Fundraising progress will hinge somewhat on the funding cycles of institutional investors and their timing for making new investments, Helminski said.
Proceeding with the formation of Fund II stems from “the success that we have had and the momentum that we have going forward, the deal flow in Michigan and the opportunity in Michigan, and the types of companies and the volumes of companies that we’re seeing,” Helminski said.
The fundraising process has garnered “strong interest … not only from our existing folks” but also from prospective institutional investors, he said.
“There’s a lot of capital out there and a lot of people feel like the stock market has sort of run up to a plateau,” Helminski said. “We’ve had a good run, and maybe it’s time to redeploy some dollars elsewhere in their portfolio. The private markets seem to be in favor more than the public markets.”
As it seeks investors for the second fund, Blackford Capital will wrap up investments from its initial $50 million Michigan Prosperity Fund that now holds six portfolio companies it has acquired since 2012.
Helminski expects Fund I to close four more deals — for a total of 10 investments — and deploy all of its available remaining capital during 2016.
Blackford Capital’s Michigan Prosperity Fund targets mature manufacturing companies based in the state. Typically, the companies generate $20 million to $100 million in annual revenues and have had three consecutive years of profitability and a potential for high growth. The fund looks for companies whose owners want to sell but will stay on after the transaction to continue to manage the business.
Most recently, the fund closed in December on the acquisition of Grand Equipment Co. in Hudsonville, a family-owned distributor and rental company for heavy equipment. The private equity firm also acquired Dickinson Press Inc. last August, a 130-year-old maker of books and printed materials for religious, education and business markets.
Fund II will have an identical investment focus as the first fund.
“From our perspective, it’s really a continuation of what we’ve been doing with a larger pool of capital,” Helminski said.
Blackford Capital also runs a national private equity fund that holds three portfolio companies.
The March 2015 merger of Wapato, Wash.-based Amtech Corp. — acquired in 2008 by Blackford’s National Growth Practice — and McClarin Plastics of Hanover, Pa. was named an M&A Deal of the Year in the annual M&A Advisor Awards.