Constitution raises $755m for Ironsides IV

The lower mid-market firm expects its fourth fund to be fully deployed by the first quarter of 2018, and anticipates a Fund V launch in the fourth quarter of 2017.

Lower mid-market firm Constitution Capital Partners has closed its fourth fund, Ironsides IV, on $755 million, surpassing its $500 million target.

The fund follows Ironsides III, which launched in March 2013 and closed in June 2015 on $823 million – a figure that included capital raised for a co-investment vehicle, according to PEI data.

“It took us a couple of years to close Ironsides III because we were deploying the capital as we raised, so we had to go back to market in a short timeframe [for Fund IV] because we were 70 percent invested with III by its final close,” Constitution managing partner Dan Cahill told Private Equity International.

He explained that Constitution targeted $400 million and raised more than double the amount, thanks to segregated mandates for co-investing and direct investing, in addition to the main fund of funds strategy. 

When asked about the decrease in size for Fund IV, Cahill said: “We were fortunate to get more demand than the target. We’d rather go out every 12 to 18 months with a smaller fund size.”

Ironside IV launched in early December of 2015, six months after the Boston-based firm closed Ironsides III, and held an interim close on $165 million in January 2016. Ironsides IV had no hard-cap, according to a Constitution spokesman.

The latest fund has already deployed 9.4 percent of its capital in four direct investments and seven fund investments. The direct investments were made in shipping and supply chain management company American Global Logistics, preschool network Cadence Education, clinical research organisation SynteractHCR, and business management systems provider Great Lakes, according to Cahill.

Ironsides IV has also committed capital to NexPhase Capital Fund III, Morgan Stanley’s North Haven Capital Partners VI, Wind Point Partners VIII, Gridiron Capital Fund III, a fund managed by Amulet Capital Partners, Avista Partners Fund IV, and L Catterton Partners VIII, Cahill said.

He added there is a robust pipeline for further direct investments, but Constitution is being selective because the market in general is “too pricey”, with 11x to 12x EBITDA multiples. For the four direct investments Ironsides IV has made, the purchase price multiples were 7.3x to 8.6x EBITDA, he said.

“We expect to be fully deployed by the first or second quarter of 2018,” Cahill told PEI. “Fund V will probably launch in the fourth quarter of 2017.”

The fund will follow the firm’s strategy of making investments of between $200 million and $1.5 billion in primary private equity funds and direct investments in companies with enterprise values of between $100 million and $1 billion.

Ironsides IV’s investor base included 30 new investors, and spread across China, Switzerland, Spain, the UK, US and Mexico, Cahill told PEI.

According to PEI data, Nebraska Investment Council committed $20 million and Pennsylvania’s Allegheny County Retirement System committed $3 million to the fund.

Constitution manages about $2.7 billion in assets, according to a statement from the firm. Performance for the previous Constitution funds was not available.