Three finance specialists have raised $275 million to launch Seattle's largest private equity fund for midsized companies, and they are...
Three finance specialists have raised $275 million to launch Seattle’s largest private equity fund for midsized companies, and they are looking in the old familiar places for investments.
Evergreen Pacific Partners wants to invest in traditional industries such as manufacturing, distribution and consumer products, areas that lack the glitz of technology and biotechnology in the Northwest.
The region is rife with venture-capital money, but only a handful of such private equity or “buyout” firms have offices here.
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Still, Evergreen Pacific is entering the market at a competitive time, with buyout firms nationally raising $53.9 billion last year, more than double the $26.4 billion raised in 2003, according to Dow Jones LBO Wire.
Buyout firms generally take large stakes in mature, privately owned companies, then replace or supplement their management teams and improve or expand operations.
Their goal is to cash out five to 10 years later by selling the companies or taking them public.
Evergreen Pacific’s three partners — Timothy Bernardez, T.J. McGill and Michael Nibarger — met while working for another Seattle private equity firm, Northwest Capital Appreciation.
Evergreen Pacific Partners
Seattle-based private equity fund
Fund size: $275 million
Founded: January 2003
First deal expected to close: March or April
Investment targets: Western U.S. and Canadian companies, with revenues between $25 million and $250 million in manufacturing, distribution, packaging, radio and cable media, and consumer products.
Source: Evergreen Pacific Partners
Their expertise is in old-line industries, and they are the first to admit these are not the sexiest sectors.
“We didn’t pick these industries because we think they’re the latest and greatest,” McGill said. “They may be slow to stagnant growers, but because of our past investing and operating experience, we can still drive organic cash-flow growth at the companies we buy.”
He and his partners plan to invest in companies with revenues of $25 million to $250 million in 13 Western states and two Western Canadian provinces.
By borrowing against acquired companies’ assets and tapping the fund’s investors for additional capital, the three men figure the fund will be the foundation for transactions totaling up to $1 billion.
All three have an entrepreneurial bug that spurred them to start the fund and has them thinking big. They hope to have five or six funds over the next 25 to 30 years.
The partners expect to close on their first investment within about a month, and are tight-lipped about which companies they are considering.
Like most buyout firms, Evergreen Pacific Partners bills itself as capable of generating its own deals and dedicated to helping companies grow.
“It’s a feature most investors expect private equity partners to do, but it happens to varying degrees,” said David Turner, a director and general partner with WestAM Private Equity Group, the asset-management subsidiary of one of Germany’s largest banks.
WestAM, a private equity firm that invests in other private equity funds, is one of the institutional investors that collectively put up about 90 percent of Evergreen Pacific’s capital. The rest came from about 30 business executives based mostly in the Northwest.
While buyout funds outside the Northwest scour the region for deals, Evergreen Pacific’s strongest competition likely will come from other firms with Seattle offices, including Norwest Capital, Blue Point Capital Partners and Endeavour Capital.
Some wealthy investors, such as Paul Allen’s Vulcan, make similar investments, but they do not have the wide investor base of a private equity fund.
Endeavour, whose biggest office is in Portland, manages $450 million and is making investments for its fourth fund of $285 million.
Like Evergreen Pacific, it looks for investments in traditional industries, a popular strategy nationally, said Aaron Richmond, a principal at Endeavour.
“Our investment strategy is currently in favor, which makes us as contrarians somewhat uncomfortable,” Richmond said.
Competition has increased nationally, with lots of money flowing into private equity funds nationwide, he and others said.
David Dandel, head of the Seattle investment-banking office for D.A. Davidson & Co., said more companies are turning to private equity funds for money now that the threshold for going public is higher.
He likes that another player is entering the Seattle market.
“It’s not just a money thing but a guidance thing, to help companies execute their strategic plans,” Dandel said.
Evergreen Pacific’s partners have loosely divided their duties among industries and among three basic functions: finding deals (McGill’s job), negotiating the particulars of those deals (Nibarger’s forte), and managing the company after the deal.
The last piece is overseen by Bernardez, who says he almost always brings in additional managers. He finds them at companies that he and his partners have backed in the past, and at their competitors.
“We don’t like the headhunter recruiting process so we spend a ton of time attracting managers,” Bernardez said.
It helps that he, McGill and Nibarger grew up in the Northwest and have private equity experience here.
“We know a lot of people,” Bernardez said.
Melissa Allison: 206-464-3312 or email@example.com