SFW Capital closes Fund II on $347.5m

New York-based SFW Capital Partners has closed its second private equity fund at its hard cap of $347.5 million after less than six months in market, according to one of the firm's partners.

SFW specialises in investing in mid-market analytical tools and related service businesses. While firm officials declined to identify the limited partners of SFW Capital Partners Fund II by name, its investor base includes a range of endowments, family offices, foundations, and certain funds of funds. 

“It was a combination of things,” SFW partner Roger Freeman told PEI, referring to the quick fundraising period. “We had successful exits from our earlier fund, strong recognition of our specialized investment strategy and also 20 plus years of experience investing in the analytical tools and related services.”

Freeman, who noted that the firm did not use a placement agent to market its second fund, said SFW's specific industry focus and experience within the analytical tools niche contributed to the successful fundraising. 

“Our specialization and track record in the sector were significant differentiators as we spoke to investors,” he said.

For SFW, analytical tools and related service companies are those that provide information, data, and analytics that support a range of corporate functions such as research, product development, process control, quality assurance, compliance, diagnostics and other services. 

Two such businesses that SFW has backed and subsequently exited include Charlotte, N.C.-based agriculture analytics company AgData and MD Buyline, a Dallas-based provider of healthcare analytics and supply chain spend capabilities that SFW sold to TractManager, a portfolio company of New York buyout group Arsenal Capital Partners. The MD Buyline sale in August 2014 garnered SFW a return of 3.5x after a three year hold period, PEI reported previously. One month earlier it sold AgData for an undisclosed sum to Vista Equity Partners.

SFW Fund II will follow the same strategy as its $305 million predecessor, making investments of between $10 million to $75 million in businesses with an enterprise value of between $15 million and a few hundred million dollars, according to Freeman.

He said the outlook for the lower mid-market segment of the analytical tools space couldn't look brighter. 

“While certainly valuations in the larger end of the market have increased over the last few years, we believe that the analytical tools and related services sector is attractive for a specialized, lower middle-market investor with deep knowledge of the relevant product technologies and analytical techniques.”

Kirkland & Ellis partners Mark Fennell and Karen Sodke served as counsel to SFW.