Philly Pro Launches Smaller Shop To Avoid Registration

Bob Levine has left Milestone Partners, the Radnor, Pa.-based buyout firm he co-founded in 1995, to start his own shop in part to avoid regulation by the Securities and Exchange Commission.

L2 Capital, also based in the Philly suburb of Radnor, will make equity investments of $1 million to $15 million in manufacturing, distribution and service companies with valuations up to $50 million, according to its new web site.

To be sure, Levine’s transition out of Milestone has been in the works for some time. He wants to concentrate on micro-cap deals, while Milestone—which started with a $36 million fund and is now investing out of a $240 million fund—typically invests as much as $25 million in lower mid-market buyouts. Managing Partners John Shoemaker and Scott Warren have been running the day-to-day operations of the firm for at least a year.

But an impending rule under Dodd-Frank which calls for firms with $150 million or more in assets to register as investment advisers bolstered Levine’s resolve to return to his small-market roots. “I just wanted to be more of an investor than a money manager,” he told sister magazine Buyouts.

Several mid-market shops have been lobbying congress to get rid of the registration rule, arguing they don’t pose any systemic risk and that it would cost them too much and distract them from investing. The House Financial Services Committee will hold a hearing on Wednesday, March 16, to review draft legislation to exempt advisers to private equity funds from the Dodd-Frank Act. Ironically, John Shoemaker of Milestone isn’t all that concerned about it. “It’s a part of doing business,” he said. “It’s not keeping me up at night.”

Levine’s departure from Milestone is amicable. He retains board seats on some portfolio companies and is an investor in the firm’s funds. Milestone and L2 Capital also expect to share deal opportunities, with L2 Capital forwarding deals too big for it to Milestone and the latter sending smaller deals by L2 Capital. “This is all positive,” Shoemaker said.

Milestone Partners, meanwhile, is getting ready to raise its fourth fund, Buyouts reported in February, and might seek as much as $450 million. Levine and Shoemaker both said Levine’s departure shouldn’t impact that effort. “We’ve had an excellent track record and I’m doing everything I can to help them raise that fund,” Levine said.

L2 Capital has more than $50 million available for investment, most of which comes from its principals, according to its web site. Levine said his new shop has three investment professionals.

Bernard Vaughan is a Senior Editor at Buyouts Magazine. Follow his tweets @BVaughanReuters. Follow Buyouts tweets @Buyouts. For information on how to subscribe, contact Greg Winterton at