Yellow Wood Partners landed $225 million for its debut fund, well over its $200 million target, that will charge no deal or monitoring fees, the firm announced in a statement. Yellow Wood, which was founded in 2009, is an operations-focused firm that targets investments in the consumer packaged goods industry.
The fund will target equity investments between $10 million and $80 million for control or minority stakes in North American companies, according to the firm. The firm is staffed by a team of operating executives that specialise in sales, marketing, operations and general management with a smaller staff of financial professionals.
Yellow Wood has instituted a limited fee structure on the fund, charging investors for management of the vehicle, but sparing portfolio companies the “burden” of deal or monitoring fees.
“Because we’ve been on the operating side… one of the fundamental things we wanted to do was not burden any companies with large … operating fees. Because we know how difficult those can be,” firm co-founder Dana Schmaltz said.
The firm managed to raise the fund with the backing of only five limited partners, Schmaltz and fellow co-founder Peter Mann told Private Equity International. The firm’s small investor base is composed of endowments and foundations based in North America, the Middle East and Australia.
“While I don’t want to say the fundraising was easy, it was very well-received. We only spoke to a very limited number of investors,” Mann said.
The partners managed to develop an impressive record prior to launching the Yellow Wood fund by partnering with firms like GTCR and The Shansby Group on individual investments. In 2009, Mann and Schmaltz partnered with Charlesbank Capital Partners to acquire five over-the-counter brands from Johnson & Johnson. The partnership, which created the company Blacksmith Brands, was then expanded and sold for a 2.5x return and 149 percent internal rate of return in November 2010.
According to Yellow Wood’s website, investments on which Mann and Schmaltz were partners have generated an IRR of 40 percent with a multiple of 2.4x.