American Securities has closed its sixth fund on $3.6 billion, beating its $3 billion target and topping its prior fund by more than 50 percent.
The firm, which traces its roots back to 1947, maintained a unique characteristic of its prior fund in the new vehicle – the fund has a six-year investment period, but has the ability to hold an investment for up to 25 years, according to chief executive officer Michael Fisch. The firm established that model with its $2.3 billion fifth fund, which closed in 2008.
“In a day and age when many private equity firms are sometimes thought to be synonymous with quick flips and short term horizons, this makes clear to prospective management teams and our existing partners that we take a longer term view and are focused on building companies, not quick exits,” Fisch told Private Equity International in an interview Tuesday.
The successful fundraising “shows our investors support” the model, he said.
Backers of the firm’s sixth fund include high net worth individuals, endowments and foundations, sovereign wealth funds and public pension funds like the El Paso Firemen and Policemen’s Pension Fund, the Montana Board of Investments, the San Francisco Employees’ Retirement System, the State of Wisconsin Investment Board and the Teachers’ Retirement System of Louisiana.
All our LPs invested shoulder to shoulder … no special terms, no side pockets, no separate accounts.
Another aspect of Fund VI that sets the vehicle apart from others in the market is that the firm did not offer any separate terms for any limited partners, Fisch said.
“All our LPs invested shoulder to shoulder … no special terms, no side pockets, no separate accounts,” Fisch said. “It’s a much more challenging fundraising environment than it was several years ago and special terms are becoming popular. We were not receptive to this trend because we believe our investors should all be on the same footing.”
The wide proliferation of different economics for different investors in private equity funds has caused some tension within the LP community, industry sources have said over prior interviews this year.
The firm invests in companies that are healthy with strong management teams; investment sizes range from $100 million to $500 million in companies with annual revenues between $100 million and $1 billion, according to documents from the Los Angeles Fire and Police Pensions, which committed $25 million to the fund.
The firm has made two investments from Fund VI, closing two deals in the fourth quarter last year. The firm acquired Global Tel*Link, which provides inmate telecommunications services, and Unifrax, a maker of ceramic fiber insulation products used in high temperature industrial applications.
Last year, affiliate American Securities Opportunities Fund closed its second vehicle on $753 million, beating its $500 million target. The distressed investment fund focuses on public and private companies in distress or “trading at distressed levels due to deterioration in operating performance or anticipated liquidity problems”, the firm said in a statement.
American Securities started out as the family office investing the fortune of Sears, Roebuck. The firm did “bootstrap” investments that eventually came to be known as leveraged buyouts.