BRS vows to raise fourth fund

Talk of US firm Bruckmann Rosser Sherrill’s demise is greatly exaggerated, says Stephen Sherrill, as it pledges to launch a fourth fund possibly targeting $400m.

New York-based buyout firm Bruckmann Rosser Sherrill & Company, founded in 1995, has sought to dispel a perception among some sources that it would be unable to raise a new fund following its failure to reach half its target for its previous vehicle in 2007.

BRS has been working its way back from the ‘short-circuited’ fundraising in 2007, which led one investor to suggest that it would be the firm’s last. Other market sources also thought it unlikely Bruckmann would raise another vehicle.

Concerns about the firm’s future also stem from the departure of one of BRS’ co-founders, Harold Rosser, who left late last year, taking his son, Luke, and managing director Jacob Organek with him.

One investor, who asked not to be named, said: “Truthfully, the only real chance [BRS] has for a Fund IV is if the ultimate performance of funds II and III ends up being stellar.”

Making a comeback

With LPs being pickier than ever in choosing managers, firms like BRS with past performance issues or senior-level turnover will have a tough time convincing the market they deserve a new fund. However, the firm believes its recent performance illustrates its ability to make money for limited partners. The firm fully intends to move forward with a fourth fund in the next few years, according to Stephen Sherrill, a founding partner at BRS.

“Everybody fully expects to raise a Fund IV. It’s my anticipation that Fund IV could be $400 million. We short-circuited our Fund III fundraise and that perception still hangs over things,” Sherrill said. “Some [people] may be looking at how we were doing a few years ago. I think we’ll prove ourselves by performance. If we don’t perform, we’ll have trouble.”

BRS closed its third fund in 2007 on around $220 million, holding only one close and cutting off fundraising early. The fund, well short of its $600 million target, was also significantly smaller than Fund II, which garnered $700 million in 1999. After the fundraising was cut short, BRS has “basically been a failing firm”, the investor said.

The idea that BRS is winding down doesn't sit well with the firm. Fundraising for Fund III was hurt by the performance of Fund II, which had a “slow” start because of exposure to the telecom industry, Sherrill said. 

But Fund II has climbed back and is producing a 1.6x net return multiple, according to BRS. Fund I generated a 1.8x net return, the firm said.

Fund III is still only about 20 percent invested, with several follow-on investments and an investment in Ruth’s Hospitality Group, which runs Ruth’s Chris Steakhouse chain of restaurants. That deal already represents an unrealised 1.6x gross return, according to an investor in BRS’ funds. The investment period on Fund III runs to late 2013.

BRS’ has weathered some poorly-performing investments, which hurt the support the firm received when raising Fund III. One of BRS’s earliest buyouts, US-based grocery chain Jitney-Jungle, went bankrupt a few years after the acquisition. Other busted investments include O’Sullivan Industries Holdings and LazyDays RV.

The firm also has had some recent strong performance, including its sale of Seroyal Holdings earlier this year. BRS had invested $28 million from funds II and III in the company and eventually made $72 million, for an approximate 2.6x gross return.

Another big win for BRS was the sale of Logan’s Roadhouse, into which the company invested $25 million and out of which it took $109 million, for a gross return of 4.7x.