Thompson Street closes Fund IV on $640m

The fund beat its $600m hard-cap and will seek investments in founder-led middle market companies in North America in the business services, health care services and engineered products sectors.

Thompson Street Capital Partners has closed its fourth fund, TSCP IV, on $640 million, surpassing its $500 million target and $600 million hard-cap after only three months of marketing.

Thompson Street managing partner Jim Cooper told Private Equity International that the fund drew commitments from LPs such as fund of funds, pension plans, endowments and family offices. They were evenly split across the LP base and a quarter were international investors.

Cooper cited a good fundraising environment and a more established track record than their past funds as reasons for a quick fundraising process, which began only in September.

He added that investors did express concerns about the high price multiples across the industry.

“We are just about finished with investing our third fund and we have found good deals at fair prices, but it’s much harder today than it was several years ago,” he told PEI.

Thompson Street conducts a broad marketing effort for finding deals, he said. The firm looks at almost 3,000 potential deals a year and tries to close two or three of them. It also seeks add-on acquisitions to offset the higher entry prices for platform acquisitions. The firm targets three add-ons for every platform investment.

“We stay very disciplined about that and we’re planning on prices staying high. We’re planning on having to operate in that environment and told investors [the same].”

Fund IV follows the strategy of its predecessor, TSCP III, which closed on $380 million in 2012 above its $350 million target. It will focus on founder-led middle market companies in North America with an EBITDA of between $4 million and $15 million. It seeks companies in the business services, health care services and engineered products sectors.

Fund III’s investors include the Oklahoma Police Pension and Retirement System, the University of Missouri System and James S. McDonnell Foundation, according to PEI’s Research & Analytics division.

Cooper said Fund III has invested in companies such as Allied 100, an online retailer of automatic external defibrillators, which it bought in 2012 and sold in 2014 to Ridgemont Equity Partners.

Whereas Fund III did not use a placement agent, the latest fund had Park Hill as the agent.