LGT backs US first time fund

(PrivateEquityCentral.net) Arsenal Capital Partners has held a final close on its debut buyout fund, rounding up $300m for a vehicle that was launched two years ago with a target of $250m.

New York-based Arsenal Capital focuses on middle-market buyout opportunities in the manufacturing, healthcare and business services sectors.  Among its founding limited partners is LGT Capital Partners, the Switzerland-based private equity and hedge fund manager.

According to Terrence Mullen, a managing director and co-founder of Arsenal Capital, the recent closing was the culmination of two years of hard work on the deal and fund-raising front. The firm acquired three companies last year after having raised $50m for a first close in the middle of 2001. Mullen said investors responded better to Arsenal’s strategy after it had an initial track record to point to. “What really crystallised the firm was having worked together as a team for a year and a half,” Mullen said. “At that point we were able to show that we had a significant impact on those deals.”

After its first closing, Arsenal Capital built its team out to 12 professionals, six with a financial focus and six with an operating focus. In 2002, the firm completed three deals – buying back-office printing solutions company Printing Solutions Holdings; the label division of printing company Mail-Well; and Interdynamics, a New York-based manufacturer of products for the automotive aftermarket.

Arsenal Capital was co-founded by Mullen, a former vice president at New York buyout giant Thomas H Lee, Barry Siadat, a former senior executive with AlliedSignal and James Marden, a former acquisitions executive with Medco Containment Services.

Arsenal was given an early boost in fundraising with the capital commitments of several principals at Thomas H Lee, including an investment from founder Thomas Lee.

Lee’s support was helpful because Mullen himself was not a high-profile partner at his former employer. “It wasn’t a superstar spinout,” he said. “But I had meaningful investment experience at one of the top firms in the nation. Our success was about a sound strategy and a broadly experienced team. Then all that matters is going out and executing.”

In addition to LGT, Arsenal Capital’s limited partners include fund of funds manager Adams Street Partners, Wilshire Private Capital, National City Equity Partners, Northeast Utilities Pension Fund, Oklahoma Police Pension and Retirement System, PPM America Capital Partners and BOKF Equity Fund, a private equity fund of funds of the Bank of Oklahoma.

The fund was advised by Campbell Lutyens, the London-based placement agent and corporate finance advisor.

Arsenal Capital targets portfolio companies with revenues between $50m and $500m.