Imperial Capital closes seventh mid-market fund at $650 mln hard cap

Imperial Capital Group wrapped up its seventh mid-market fund, raising $650 million.

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

Fund VII, Imperial’s largest fund to date, secured 30 percent more than Fund VI, which raised $500 million in 2017. It brings assets managed to more than $1.5 billion.

The fund 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 signed on eight Canadian institutions. None were identified, though prior LPs have included OPTrust, a $20 billion Ontario pension system.

Justin MacCormack, managing partner of Imperial Capital Group.

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

Deal flow will be uncovered in healthcare and business and consumer services. Imperial has long specialized in these sectors, using in-house knowledge and resources to source, make and oversee investments.

Since 2008, and not including Funds VI and VII, realized and unrealized investments generated more than 3 x 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 so far done three deals. In February, it invested in GO Car Wash, a U.S. car wash platform, and Cultivate, a U.S. therapy provider to children with autism and related disabilities.

Last month the fund closed the third, backing Certus Pest, a new entrant in North America’s pest control sector.

Stephen Lister, Managing Partner, Imperial Capital Group

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.

Certus marks Imperial’s first foray into pest control, Rosenthal said.

The company has key characteristics of interest, he said, such as non-cyclicality and a focus on necessity services. Pest control’s fragmented nature also gives Imperial an opportunity to build on its recent experience with roll-up strategies.

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

Most recruitment is for the investment team and portfolio management group. Imperial currently has about 40 employees, half of them investment pros.

Imperial was founded in 1989 by Rosenthal and Managing Partner Stephen Lister. Then in their 20s, the pair met in 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.