Bain closes $390 mln Double Impact Fund, inks first two deals

Bain Capital’s fund for investments in environmentally or socially impactful investments held a final close on $390 million. The firm marked the close of the Bain Capital Double Impact Fund by announcing its first two investments through the new platform.

Living Earth recycles organic waste into compost and mulch. Its other portfolio company, Impact Fitness, operates gyms and health clubs in underserved communities in Indiana and Michigan.

NXT Capital financed the Living Earth deal. Twin Brook Capital Partners provided financing for Impact Fitness. The terms of both transactions were not disclosed.

The name of the platform, Bain Capital Double Impact, refers to the strategy of investing in lower-mid-market companies that will deliver a financial return along with a positive social footprint — be it environmental sustainability, health and wellness or community building.

“There are trends around things, like healthy eating, or general wellness, fitness [and] environmental stewardship, that are driving market changes,” Bain Double Impact Managing Director Deval Patrick told Buyouts. Greg Shell and Warren Valdmanis are also managing directors of the fund.

Patrick, the former Democratic governor of Massachusetts, noted that consumers, particularly millennial consumers, are increasingly drawn to companies that ascribe to non-financial missions or values.

The Living Earth investment fits that description. The Dallas company collects organic material from contractors and builders, composts or otherwise recycles, and resells the compost or mulch back to contractors and builders. It’s a circular business model that reduces methane-producing waste, cutting greenhouse gas emissions.

Impact Fitness is a slightly different approach to impact investing. While private equity firms have a history of acquiring gyms, those investments are rarely spotlighted for engendering wellness or improving consumer health.

Impact Fitness, however, inverted the business model of most gym franchisees. Many of its facilities are in “fitness deserts,” Patrick said, referring to communities with limited access to facilities for physical fitness and higher frequencies of diseases like diabetes and heart disease.

Rather than catering to wealthier, healthier communities with time and money to burn, Impact Fitness targets consumers who wouldn’t typically shell out for a gym membership.

“The impact angle here was not the typical gym economics, which is basically charge as much as you can and hope nobody comes,” he said. “It’s the inverse: Charge an affordable rate and encourage people to come.”

To that end, the gym investment’s social impact lies in increasing the number of affordable outlets for exercise and activity, positively affecting community health in the process.

“The challenges that we face as a country and this world are too big for government and philanthropy alone. It’s not like those don’t have a role, but business has a role as well,” Patrick told Buyouts. “The trends around healthy enterprise, they’re not going back. They’re not going anywhere.”

Action Item: More on Bain Capital Double Impact: www.baincapitaldoubleimpact.com

Former Massachusetts Gov, Deval Patrick receives an honorary Doctor of Laws degree during the 364th Commencement Exercises at Harvard University in Cambridge on May 28, 2015. Photo courtesy Reuters/Brian Snyder