Mid-market crowding leads Irving Place to smaller deals

  • Firm seeks deals in $10 mln-$15 mln EBITDA range
  • Irving Place had sought companies with at least $20 mln
  • Dynojet follows profile of new Irving Place parameters

Irving Place Capital has started to move down-market in search of better pricing and opportunities to build up companies, said Partner Devraj Roy.

“We’ve really started investing in companies in the $10 million to $15 million range,” Roy said on a panel at Columbia Business School’s March 3 private equity conference. “We feel like those businesses have more low-hanging fruit where we can move the needle.”

Early in the decade, Irving Place invested only in companies with more than $20 million of EBITDA, an archived version of its website shows. As larger deals in the middle market became more competitive and upper-mid-market firms started to drift into smaller deals, Irving Place moved into sub-$15 million EBITDA deals in search of better returns and lower prices.

“It does put pressure on your ability to put dollars out, so we have to be disciplined in finding platforms where we can put more capital in down the road,” he said, speaking on a leveraged-buyouts panel. “The risk profile [for lower-middle-market companies] is different; the level of portfolio involvement for us is different.”

“That leads us to smaller deals, slightly more complex situations,” he said.

One of the firm’s more recent lower-middle-market deals was for Dynojet Research, which it acquired a little more than a year ago, Roy told Buyouts after the panel. Dynojet produces aftermarket performance parts for ATVs, cars and motorcycles.

Irving Place tends to look for opportunities in deeply fragmented industries, where the firm’s institutional capital can accelerate its portfolio companies’ processes for purchasing add-on companies. The firm typically invests in the consumer, industrial and packaging sectors.

How much capital Irving Place has to invest is unclear. The firm’s pivot toward lower-middle-market deals comes after the restructuring of its third fund, which raised $2.7 billion in 2006. The firm sought to raise another $300 million for new investments as part of the restructuring, documents seen by Buyouts in 2015 showed.

A spokesperson for Irving Place said the move toward smaller deals was unrelated to the secondary-market transaction.

Irving Place Capital Partners III SPV, the restructure fund, had a gross asset value of about $1.7 billion as of October 2016, the firm’s Form ADV shows.

Irving Place Capital, formerly Bear Stearns Merchant Bank, was spun out of JPMorgan in 2008. John Howard and Phil Carpenter III are co-managing partners of the New York firm.

Action Item: More about Irving Place Capital: www.irvingplacecapital.com/

Photo of John Howard courtesy of Irving Place

CORRECTION: An earlier version of the story incorrectly identified the firm as Irving Plaza in the seventh paragraph. The story was also updated to provide comment from an Irving Place spokesperson.