Imperial Capital caps biggest fund for lower mid-market deals

Imperial Capital Group has raised its largest fund to date, capping its seventh fund at C$650 million ($486 million).

The Toronto private equity firm closed Imperial Capital Acquisition Fund VII in May, exceeding a C$500 million target and hitting its hard cap in less than five months of fundraising, Managing Partners Jeff Rosenthal and Justin MacCormack said.

Its previous fund raised C$500 million in 2017. Fund VII brings assets managed to more than C$1.5 billion.

The new vehicle was backed by 300-plus new and existing limited partners. Returning investors generally increased commitment sizes, Rosenthal said. Wealthy investors based primarily in Canada made up the lion’s share of LPs, many of them regular contributors to Imperial’s offerings.

There was also a “flurry of institutional interest” in Fund VII, not all of which could be met, Rosenthal said.

Imperial said it signed on eight Canadian institutions. None were identified, though one prior LP was OPTrust, a C$20 billion Ontario pension system.

Fund VII will maintain Imperial’s strategy, making control or minority investments in lower mid-market healthcare and business and consumer-services companies in North America. Target opportunities typically have Ebitda of $5 million to $40 million.

Since 2008, and not including Funds VI and VII, realized and unrealized investments generated more than 3x invested capital and an IRR at the “low end of the 30s,” Rosenthal said.

Fund VI, now almost fully invested, made seven investments. Its successor is expected to make a similar number, enabling Imperial to commit more equity to platform companies, Rosenthal said.

Fund VII has already done three deals. In February, it invested in GO Car Wash, a car wash platform, and Cultivate, a therapy provider to children with autism and related disabilities.

Last month the fund wrapped up its third deal, Certus Pest, a new entrant in North America’s pest control sector. Certus is Imperial’s first investment in pest control, Rosenthal said.

Formed in partnership with industry executives, Certus invests in and partners with regional pest control businesses. It has already completed two acquisitions: Seattle, Washington’s Eco Elite Pest Control and Mathis Exterminating.

With the close of Fund VII, Imperial is “actively hiring,” MacCormack said.

Most recruitment is for the investment team and the firm’s newly created portfolio management group. Imperial currently has about 40 employees, half of them investment professionals.

Imperial was founded in 1989 by Rosenthal and Managing Partner Stephen Lister. Then in their 20s, the pair met while doing a real estate deal and shortly afterward decided to start a PE firm.

Other senior team members include Partner Chris Harris, Principal Gene Shkolnik and Vice Presidents Josh Gartner, Evan Jellie, Josh Kochen and Chad Royer. MacCormack, who joined Imperial in 2007, was promoted to managing partner last year.

Growing U.S. market focus

Over the past two years, Imperial has increasingly located its platform investments in the United States.

The first three deals out of Fund VII are all U.S.-based, as are most of Fund VI’s portfolio companies, including AmeriVet, a veterinary clinic management business, and Matrix Sciences, a food testing and compliance services platform.

Imperial’s most recent Canadian deal is Dentalcorp, which secured a re-up investment at the time of L Catteron’s acquisition.

Action Item: Managing Patner Jeffrey Rosenthal can be reached at jr@imperialcap.com or (416) 362-3658, ext. 226