Cairngorm Capital has held a first and final close on its debut fund, having raised more than £50 million ($77 million; €68 million) from three limited partners, including two European funds of funds and a US endowment, as well as founding partner Andrew Steel.
Cairngorm Capital I announced its first and final close on 1 September.
Steel, a former HIG Capital partner, alongside placement agent Acanthus began talking to investors at the beginning of the year, Acanthus partner Wilf Wilkinson said.
“It was raised with their guidance,” Wilkinson noted of the first time fund’s three investors, which made roughly equal commitments.
There was no marketing and the funds were raised in a reverse solicitation process, Steel told Private Equity International, noting that initially he did not expect to raise a fund. “I’m a one partner firm and I wanted to keep it small and do a specific type of investing.”
“There is too much money in the market and we ended up in the perverse situation that we couldn’t accommodate investors with minimum commitment sizes that were too big,” Steel said.
Steel described Cairngorm Capital I as a starter fund, noting that most of its investors are already pledged to a second fund that could be bigger and launch in two to three years.
Fund I has yet to make an investment but is considering three deals, targeting opportunities in “transformational growth” where the fund can make operational improvements, including carve outs, Wilkinson said.
“It’s not special situations, but borderline, targeting companies where there is a major angle for affecting serious change,” Wilkinson said.
The fund would look for regional companies that want to expand nationally, and buy and build and consolidation opportunities in mature markets, where it can drive performance with a focus on good management teams, Steel said.
“We have a number of live opportunities which is one reason investors provided the funding. We’ll do one or two investments in the next twelve months.”
He described the firm’s approach as “hands on” and noted that he enjoyed working with management teams. “Most of my career has not been in the private equity industry, it’s been in real jobs, running factories and real businesses.”
Steel was a founder member of HIG’s London team from 2007 to 2013, according to Cairngorm’s website. He worked on transactions including the buyout of UK window company Synseal Extrusions and marketing firm Bezier, according to reports.
Prior to HIG he was director of business development at Home Depot in the US and has held international managerial roles at building products supplier Caradon Plc, according to Cairngorm’s website. He founded the firm in 2014.
The fund will invest equity cheques of £10 million to £15 million in midmarket companies in industrial and “business to business markets”, including in manufacturers, distributors and service companies, with operating profits of £2 million to £20 million, according to the firm's website.
“I’m interested companies that are big enough to be real businesses but small enough to grow. The ticket size is big enough to justify the team,” Steel said.
The firm expects to hire two others, both with experience working for HIG, in junior positions soon, and another partner in the next eighteen months, Wilkinson said.
Cairngorm Capital chairman is Lee Hess, who worked with Steel at Home Depot. He is the founder and chairman of INSTALLS, which provides home instalment services to US retailers including Costco, Bestbuy and Dell.