Start-up Seeks $100M To Back Smaller LBO Funds

Start-up Mansbridge Capital Management has set out to round up $100 million for a debut fund of funds earmarked for smaller buyout partnerships of no more than $1 billion in size. It has secured $30 million so far.

“History has shown that the smaller buyouts have consistently outperformed the larger buyouts,” said Lance Mansbridge, one of two partners at the firm, and most recently a VP and senior consultant at San Francisco based Strategic Investment Solutions Inc. Small firms accomplish this in part by having highly focused investment strategies, and by taking a hands-on approach with their portfolio companies, Mansbridge said. “It just gives them a competitive advantage over their peers.”

Mansbridge Capital plans to pitch its first product to wealthy and institutional investors who can appreciate the virtues of small buyout funds but who either have trouble identifying them or gaining access to them.

Many of these shops are simply tough to find, said Mansbridge: They often shun placement agents, lack investor relations executives on staff, and may even forgo putting up a Web site. At the same time, they often enjoy such “incredible relationships” with their limited partners that “access is a huge problem,” he said.

Mansbridge launched his San Francisco-based shop in the second half of last year, having left Strategic Investment Solutions in July after a six-and-a-half year career recommending private equity funds on behalf of institutional clients and monitoring their portfolios. The firm had about 14 clients with private equity portfolios when he left, Mansbridge said, representing more than $8 billion in combined capital allocated to the asset class. During his time at SIS Mansbridge developed relationships with professionals at well over 50 buyout firms, he said.

Toward the end of the year Mansbridge brought aboard a second partner, Thomas Cusick. Until November 2005 Cusick was a managing director and head of the San Francisco office of CIBC Capital Partners, the private equity arm of the Canadian Imperial Bank of Commerce. There he oversaw a portfolio of some two dozen mature companies in business services, software, semiconductors, tech-enabled services and other fields. Cusick was particularly involved in the acquisition of three companies in 2004 to form Authoria, a Waltham, Mass.-based provider of software applications for human resources executives.

The firm’s debut fund, Mansbridge Capital Partners LP, secured a $30 million commitment from a seed investor in a first closing last year. The clock started ticking on a two-year investment period at the first close, so Mansbridge and Cusick are eager to make headway toward their $100 million fundraising goal. Ideally they’d like to have sufficient funding to back four managers per year. That would translate into average commitments of around $10 million per fund.

Mansbridge Capital has backed two partnerships so far—H.I.G. Capital Partners IV, which closed at $750 million last year, and Arbor Investment Partners II, believed to be in the market with a $125 million target. Miami-based HIG Capital has a strategy of buying profitable, small and medium-sized companies in manufacturing and services; Chicago-based Arbor Private Investment Company acquires food and beverage companies.—D.T.