Fulcrum holds $180 mln first close on fund earmarked mainly for Canadian companies

Canadian private equity firm Fulcrum Capital Partners has raised $180 million in a first close of its fifth partnership, Fulcrum Capital Partners V LP, earmarked mainly for investments in lower mid-market Canadian companies.

That’s 60 percent of the way to Fund V’s $300 million target, which Fulcrum Capital, with offices in Vancouver and Toronto, expects to reach in the first quarter of 2015. If the firm reaches its target, the new fund would be 55 percent larger than Fulcrum Capital Partners IV LP, which raised $193 million when it closed in 2012.

Nine institutional investors, most of them Canadian, came into the initial close. John Philp, a Fulcrum Capital managing partner, said roughly half of the investors are repeat limited partners.

“We’re pleased to be getting a step up from a number of our existing limited partners,” Philp said. “We also started conversations last month with international investors, several of which are now moving to due diligence. As a result, we’re feeling optimistic about meeting our target early next year.”

Philp said Fulcrum Capital will continue to focus on making investments in lower mid-market businesses located primarily in Canada and with EBITDA ranging from $5 million to $20 million.

The firm will utilize the additional capital “to take larger ownership positions in the companies we back,” he said. Equity investments of Fund V will typically range between $10 million and $35 million.

Fulcrum Capital’s latest round of fundraising comes just a little over three years since the firm emerged from a management buyout of HSBC Capital (Canada)’s private equity group.

Philp was one of the leaders of the November 2011 buyout. Today, Fulcrum Capital manages about $500 million. The New York-based Graycliff Partners made a similar transition from HSBC Capital (USA) shortly after Fulcrum Capital’s launch.

All eight members of Fulcrum Capital’s partnership team worked at HSBC Capital (Canada), which prior to the management buyout was a private equity and mezzanine investor for nearly 18 years.

Philp said the firm’s current leadership has worked together for more than a decade, investing in 38 companies and realizing 24 portfolio exits. Fulcrum Capital reports generating a gross return of 3.3x invested capital from realized investments, for a gross IRR of 28.7 percent.

The firm has completed a string of exits over the past year and a half. They include its sale last December of Edmonton-based railway services company A&B Rail Services to an investor group led by TorQuest Partners. Fulcrum Capital, which invested in A&B in 2008, obtained $137 million in cash proceeds, or 14.3x invested capital and a 74.2 percent IRR.

Other recent liquidity events include an exit from Jump.ca Wireless Supply, a retailer of cellular products and services, and the sale of Alumicor, a fabricator of aluminum building products.

Fulcrum Capital has recently completed several transactions. They include an investment in Weatherhaven Global Resources, a supplier of shelter systems, in June 2014. The Burnaby, B.C.-based Weatherhaven marked Fund IV’s 11th investment.

“We are seeing unprecedented origination of opportunities at the moment,” Philp said. He said the firm is processing half a dozen opportunities, which is gratifying to LPs eager to see their capital “put to work.”

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