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Tonka Bay Raises $150 Mln With Fund III

Tonka Bay Equity Partners’ third fund came in at $150 million, above its initial target.

The Minnetonka, Minn.-based PE firm had planned to raise $125 million for fund III, according to a statement. Instead, Tonka Bay collected $63 million in private capital and, through the SBIC, leveraged the pool to $150 million, says Cary Musech, a Tonka Bay managing principal.

Tonka Bay didn’t use a placement agent, he says. Marketing began in February. “It went extremely quickly,” Musech says of the fundraising. Tonka Bay ended up turning away some investors, he says.

“The stock market was pretty crazy this summer and that was driving more people to look for alternatives,” Musech says.

The fund closed in mid-October, he says. Investors include pension plans, foundations, trusts, commercial banks, college and university endowments, and family offices. Tonka Bay focuses on highly engineered manufacturing, value-added distribution and business services. The PE firm invests in companies with revenues from $20 million to $50 million, the statement says

Tonka Bay’s last fund, also an SBIC pool, raised $125 million in 2005. The PE firm collected $50 million of private capital for its second fund, Musech says. The pool has completed two exits this year. In January, Tonka Bay closed the sale of All Flex, which makes flexible circuits, to Granite Equity Partners. Tonka Bay, in August, also sold The Resort Co., a vacation rental and property management company, to Wyndham Vacation Rentals.

Fund I, which is also an SBIC fund, raised $75 million in 1998. The pool has a 20% IRR net to LPs, Musech says.

It’s too early for fund II [for an IRR] but the pool is tracking at 20%, Musech says.