New Firm Targets $80M For Small Deals

Firm: Guardian Capital Partners

Fund: Guardian Capital Partners Fund LP

Target: $80 million

Amount Raised: $37 million

Guardian Capital Partners, a newly formed group looking to make control plays in the lower middle market, held a first close on $37 million for its debut fund earlier this month, a source familiar with the firm told Buyouts.

The firm, based in the Philadelphia suburb of Wayne, Pa., has reportedly set a target of $80 million for its inaugural vehicle, although the final tally could reach closer to $100 million or more. Insurance giant MassMutual, advised by Babson Capital Management, has signed on as the fund’s anchor investor. Representatives of Guardian Capital declined to comment.

The new firm is led by a trio of managing partners: Scott Evans, formerly of Cerberus Capital Management; Peter Haabestad, a former investment banker at Susquehanna Financial and before that the CEO of a medical company; and Hugh Kenworthy, former president of small-cap buyout shop Brynavon Group.

Guardian Capital expects to make eight to 10 control investments from its fund, writing equity checks of $5 million to $15 million for companies with enterprise values of $15 million to $40 million. The firm has broadly targeted the services and manufacturing sectors, with an emphasis on industrial companies, according to our source.

Guardian Capital plans to pursue acquisitions of corporate divestitures, which could be more common as the economy slows. The firm is also interested in family-owned companies looking to make ownership transitions, which could become more common as the baby-boom generation enters retirement, according to our source.

Firms such as Guardian Capital have sought out the lower middle market because they believe the sector operates less efficiently than do the middle and large markets, opening up the possibility for better returns. Firms targeting this end of the market also believe there is less competition from other players, since many shops have abandoned the space to raise successively larger funds. That, in turn, could lead to a greater chance of securing a proprietary deal.

Guardian Capital’s “sweet spot is below the investment banker dignity line,” our source said. “Below that dignity line, it’s possible to get the one-off deal.”

Guardian Capital has not yet completed a deal.—J.H.