Harvest Partners has closed its latest, middle market-focused fund on $815 million (€612 million), bringing the US firm’s total capital under management to roughly $1.7 billion. The fund, which began to be heavily marketed in mid-2006, had an initial target of $600 million.
Harvest Partners V’s limited partners include public and private pension funds, fund of funds, US insurance companies and financial institutions. The fund’s investment strategy – which involves management buyouts, recaps and growth financings for industrial, business services and consumer/retail companies – is similar to that of the firm’s previous vehicles, the most recent of which closed in July 2002 on $558 million, and had a gross internal rate of return of 65 percent, according to senior managing director Thomas Arenz.
Credit Suisse was the placement agent for both HP IV and HP V.
In January, HP V made its first investment, along with HP IV, when Harvest Partners acquired energy services firm Aquilex from First Reserve, an energy-oriented private equity firm. Harvest plans to have eight to 10 companies in its HP V portfolio.
The formation of the firm’s fifth fund coincided with the completion of an ownership transition from Harvest’s founders to senior managing directors Arenz, Stephen Eisenstein and Ira Kleinman. The transfer was announced last year, when the fund held a first close.
The founders, explains Arenz, had “reached a point in their careers when they were ready for a change”.
Arenz, Eisenstein and Kleinman, he said, “have been running the investment programme really for all of fund IV which goes back 5 years, but even before that, [we] were working to make some changes at the firm to improve and manage our investment programme. So this is kind of a natural endpoint for what is a transition that probably began seven year ago.”
All three executives have been with the 25-year old firm for more than a decade. Prior to joining Harvest in 1996, Arenz had previously worked as the president of the North American subsidiary of Preussag and as a principal with Joseph Littlejohn & Levy. Eisenstein joined Harvest in 1999, having previously been a founding partner at Paribas Principal Partners. Immediately prior to joining Harvest in 1984, Kleinman worked in the treasury department of insurance company American International Group.
Harvest also promoted Michael DeFlorio to senior managing director from managing director. DeFlorio has been with the firm since June 2003 and led the recent Aquilex deal.