Tenex Capital Management, a spin-out from Cerberus Capital Management, has closed its debut fund on $452 million, above its $400 million target and $425 million hard-cap.
The fund will make investments of between $25 million and $75 million in Canada and the US. Tenex will target a return of 2.5x and a gross internal rate of return of 25 percent. The fund was placed by Atlantic-Pacific Capital.
Tenex was on the fundraising trail for 18 months, but received substantially more interest from investors during the latter half of the fundraise, chief executive officer and managing director Michael Green told Private Equity International.
Limited partners in the fund include public and private pension funds, endowments and foundations, family offices, financial institutions and insurance companies. One LP in the fund told Private Equity International in a prior interview that the investment team was one of the most impressive they had ever talked to.
The firm is charging a 2 percent management fee, which the LP said was justified because the team is new and needs to fund operations. Tenex is also giving back 100 percent of any deal fees to LP to offset the management fee, and the GP is contributing 3 percent of capital commitments, according to New Jersey pension documents.
Tenex has made one investment from the fund so far, acquiring transportation and logistics provider LinkAmerica in July for an undisclosed sum.
Members of the Tenex team will take on operational roles in portfolio companies. “It is differentiated from some private equity firms that hire very senior executives to sit on boards,” Green said. “That model we don’t subscribe to. We want people to be engaged at the company and that’s the way we’ve always done it.”
The firm was founded by Green, Varun Bedi, JP Bretl, Joe Cottone, and Chad Spooner, all of whom previously worked together at Cerberus. Tenex focuses on investing in distressed companies in the mid-market in North America, but also targets companies without performance or liquidity challenges.
“We call ourselves special situations because not all the companies we’ll acquire are distressed,” Green said. “LPs have told me that, whether [a company] needs a turnaround or whether its performing on average, the market for general purpose investors that can’t get in there and help enhance performance is not differentiated enough right now.”
Tenex’s team of 15 investment professionals targets companies with $75 million to $300 million in annual revenues in the transportation, industrials, manufacturing, telecommunications, and health and business services sectors.
“If you stay at companies that are about $300 million and below, we think there’s tremendous opportunity in the underperforming sector,” Green said.