Mellon’s Mystery Buyer Revealed

What is MVI LP? That’s the question some of us were asking last month, when an SEC filing revealed that Mellon Financial Corp. had sold its Mellon Ventures portfolio to Goldman Sachs and MVI LP. Most market watchers either assumed it was a Goldman holding company or gave it no thought whatsoever. But it turns out to be quite significant.

MVI LP is a vehicle formed by five former partners with Mellon Ventures, including group CEO Larry Mock. This quintet has quietly reformed as Navigation Capital Partners (no relation to a defunct boutique bank of the same name), an Atlanta-based private equity firm focused on growth capital and lower-middle-market manufacturing, distribution and services opportunities in the Southwest and Mid-Atlantic regions. In addition to Mock, the Navigation team includes John Richardson (who headed Mellon Ventures’ growth and buyouts practice), Mark Downs, Eerik Giles and David Panton.

Navigation purchased Mellon Ventures’ direct investment portfolio, which included 34 companies at a cost basis of $250 million. It’s unclear what the purchase price was, in part because Navigation will owe Mellon Financial a small cut of positive liquidity events. Mellon is not paying Navigation any fees, however, except for some legal bills related to one of the portfolio companies. Navigation has board seats or board observer rights on 22 of the 34 companies, and has capital for follow-on financing, if necessary (Mellon Ventures only invested $30 million in follow-on funding since direct investing was halted in 2004).

So where did Goldman Sachs fit into all of this? Goldman acquired Mellon Ventures’ indirect portfolio, which consists of limited partner positions in third-party venture capital and buyout funds. Goldman also paid for most of the Navigation’s acquisition, and is now Navigation’s cornerstone limited partner (both for the existing MVI portfolio and for a new fund that is currently being raised). No details yet on a fund-raising target, save for that it will be well in excess of the $150-$200 million or so that lower-middle-market funds typically raise.

Navigation is expected to issue an introductory press release later this month, and will become more transparent (website, etc.) once it closes the fund. For now, it consists of the five partners plus one vice president, a CFO and an administrative assistant. In an interesting side-note, five of Navigation’s eight staffers are either African-American or female. Definitely unusual in the white male-dominated world of private equity.  But that doesn’t, of course mean it’s minority-owned – as the primary “shareholder” is Goldman Sachs.

(disclaimer: I own some Mellon stock, which soon will be Bank of New York stock. I have never made use of its corporate jet…)