ParkerGale LPs approve close of debut fund above hard cap

  • Fund: ParkerGale Capital LP
  • Target: $200 mln
  • Hard Cap: $225 mln
  • Amount raised: $240 mln

ParkerGale Capital closed its debut fund at $240 million, nearly 7 percent above the $225 million hard cap, as the Chicago firm’s deal-making during the fundraising helped sway LPs.

Partner Devin Mathews said LPs approved the firm’s proposal to allow one more investor into the fund, pushing it above the hard cap.

ParkerGale had deployed capital from its first fund closing last year to make its first investments and start courting more LPs to the fund. “That gave us a new appreciation for first-close LPs,” Mathews said by phone. “There’s a special place in heaven for them.”

Once ParkerGale closed its first two platforms — Aircraft Technical Publishers and OnePlus Corp — it started gaining more traction on fundraising. During that time, OnePlus Corp moved to close its first add-on deal, acquiring SmartBin.

ParkerGale set up chats between LPs and CEOs of their portfolio companies to monitor the firm’s progress.

“Once we got a couple of deals done in the fund, that took away some of the blind-pool risk for LPs,” Mathews said. “LPs could see how things were performing and we provided co-investment opportunities. All of that got people more comfortable with our progress.”

ParkerGale offered LPs a European-style waterfall distribution structure, including a pledge to pay back all contributed capital, plus fees and an 8 percent preferred return prior to collecting carried interest.

“There’s a lot of reasons LPs can say ‘no’ to a fund, just like there’s a lot of reasons why we say ‘no’ to an investment,” Mathews said of the LP-friendly terms. “We didn’t want terms to get in the way of a good thing. We have a reputation of being LP-friendly and we’re committed to that.”

Looking ahead, ParkerGale expects to close more add-on deals in the next few months, but the high-priced acquisition environment poses challenges, he said. “We think it’s still a good market for deals, but we’re cautious purely for a valuations reason,” he said.

With about eight portfolio companies planned for the fund, ParkerGale expects to make one or two platform investments a year of about $20 million to $40 million each. That’s the same price range the firm’s principals had as a team at Chicago Growth Partners prior to launching ParkerGale. The firm continues to sift for profitable companies with no prior institutional money.

“It’s a huge universe,” Mathews said. “There are plenty of companies out there to look at. About 80 percent of the Inc magazine list of the 5,000 fastest growing companies don’t have any venture capital.”

Action Item: ParkerGale podcast about raising its first fund: http://www.parkergale.com/podcasts/2016/11/8/fundraising-part-1

Photo of Devin Mathews courtesy Chicago Growth Partners