Stone Arch Building Second Fund

Mid-market buyout firm Stone Arch Capital LLC is nearing a final close on its second fund, peHUB has learned.

Peter Grant, a partner with Minneapolis-based Stone Arch, said that the fund has nearly $170 million in capital commitments, and hopes to hold a final close on its $200 million target by year-end. “We’re hopeful right now but we also recognize it’s a tough out there for everyone,” Grant says. “We got a little lucky with the timing of our first close [$160M in June], which was just before things got really bad, so we were already pretty far along.”

On its website, Stone Arch Capital states it looks to make equity investments of between $10 million and $25 million in its deals. It targets companies with annual EBITDA of more than $5 million and sustainable operating margins, usually of 10 percent or higher. The sector focus is on the manufacturing and service industries, excluding real estate, technology and commodities-related businesses. It defines the Midwest region as Illinois, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin.

Current portfolio companies include Wholesale Produce Supply Co., a fruit and vegetable distributor; Natural Resource Group, which provides environmental permitting and consulting services, and Alco Manufacturing Corp., a maker of hydraulic hose fittings.

Stone Arch previously closed on a $100 million debut fund in June 2006.