Imperial Capital Group nears finish line with $650 mln Fund VII

Imperial Capital Group is only weeks away from wrapping up a seventh mid-market fund at its $650 million hard cap.

Imperial Capital Acquisition Fund VII, launched in December, has already raised or hard-circled commitments above its $500 million target, Managing Partners Jeff Rosenthal and Justin MacCormack told PE Hub Canada. They expect to see a final close at $650 million in April.

If this happens, the fund will be the largest in the Toronto private equity firm’s three-decade history, exceeding by 30 percent the $500 million secured by Fund VI in 2017.

The new vehicle is raising capital from a mix of new and returning limited partners, Rosenthal said. He estimates 300 to 350 LPs to eventually sign on.

The vast majority are wealthy investors, many of them participants in the firm’s offerings since the 1990s. The rest are mostly Canadian institutions, none of which were identified. Previous LPs have included OPTrust, a $20 billion Ontario pension system.

Imperial makes control or minority investments in lower mid-market companies in North America with Ebitda of $5 million to $40 million.

Opportunities are sourced in healthcare and business and consumer services. The firm has long specialized in these sectors, utilizing knowledge and resources developed in-house.

Justin MacCormack, managing partner of Imperial Capital Group.

Inaugural deals

Fund VII will maintain Imperial’s investment strategy, Rosenthal said. The deeper pool will enable deployments of “slightly more capital” than its predecessor, he said, and perhaps one or two more deals.

The fund has already closed two debut investments, including GO Car Wash, a Phoenix, Arizona car wash platform.

Launched in February, GO Car Wash aims to consolidate the fragmented car-wash sector by focusing on acquisitions, partnerships and new site build-outs in secondary cities in North America. Imperial is partnering with industry veterans Darren Skarecky and JT Thomson.

In the same month, Fund VII backed Cultivate Behavioral Health & Education, an Austin, Texas therapy provider to children with autism and other developmental disabilities.

Imperial has already had success with roll-up strategies targeted to highly fragmented industry verticals.

A prominent example is Dentalcorp, Canada’s largest network of dental clinics. L Catteron acquired Dentalcorp last April, generating 3.5 x Imperial’s prior four-year investment, which translates into an IRR of 50 percent, PE Hub Canada previously reported.

Imperial reinvested in the Toronto company alongside L Catteron through Fund VI.

Stephen Lister, managing partner of Imperial Capital Group.

New leadership, fresh hires

Imperial’s investment team has undergone change of late, partly as a result of promotions at the senior level.

They include MacCormack, appointed managing partner in 2018. He joined Rosenthal and Stephen Lister, who together founded the firm in 1989.

MacCormack came to Imperial 12 years ago from Onex Corp to establish the healthcare group. He has since been a “key architect of the firm’s ongoing development,” Rosenthal said.

Chris Harris, who joined in 2007 from KPMG, was promoted to partner in January.

Rosenthal says Imperial is also adding to its bench strength. This activity will include hiring fresh talent for the portfolio management group led by Vice President Josh Gartner.

The portfolio management group was created to reinforce value-adding capabilities and lessen reliance on external advice, Rosenthal said. He sees the resource as especially useful to portfolio companies performing roll-ups.

Other senior team members include Principal Gene Shkolnik and Vice Presidents Evan Jellie, Josh Kochen and Chad Royer.

With the new hires, Rosenthal expects Imperial’s entire staff complement to increase to nearly 40 by the end of 2019.