With no formal track record or pool of capital, former Cypress Group Managing Director Jon Foster set out to start a new private equity firm during a terrible time to do such a thing.
Alongside a team of operating experts (Steve Cortinovis, former president of Europe for Emerson Electric, John McGovern, former CFO of Georgia-Pacific and Steven Martin, former EVP at Ingersoll-Rand), Foster founded Current Capital. The firm is presently an operations-focused fundless sponsor building its track record with the hope of evolving into a full-on buyout firm that also will offer a suite of advisory and consulting services. According to Foster, Current Capital won’t come to market with a proper buyout fund until said market turns around. At that point it’ll seek around $200 million in commitments, he said.
For the time being, Current Capital is building its track record through individual, creative deals that still fit into its lower middle market services and industrials focus. The firm’s first deal, not previously disclosed, occurred back in November, when it partnered with GSO Capital to “manage the firm’s investment” in portfolio company Tompkins Associates. Tomkins Associates is a logistics company that GSO Capital purchased in 2007; the firm had originally intended to implement a roll-up strategy through its Global Integrated Business Solutions (GIBS) platform. Current Capital entered the scene to apply its operational expertise to the company alongside management. Foster refused to comment on whether it has invested in the company. Foster and Steven Martin, a managing director at Current Capital, are on the company’s board.
The capital for any Current Capital deal would come from wealthy families, firms with a strategy of investing in fundless sponsors, and “a few private equity firms with whom we have unique relationship,” Foster said. Current Capital has two or three deals in the waste management, engineering and construction businesses that are “in the sixth inning,” he added. The firm plans to write equity checks of between $20 million and $25 million for control and minority stakes in companies with revenues anywhere from $20 million to $250 million.
That size range is rich with investment opportunity, Foster said, because companies of that size are too small for IPOs or high yield bond offerings. Further, Current Capital has found that the loan market for up to 3x leverage has been open for industrials and services businesses of this size.