TorQuest invests in McKeil Marine, eyes horizon with $925 mln Fund IV

TorQuest Partners has completed the final platform deal of its third mid-market fund, signalling the start of preparations to deploy the substantial $925 million raised by Fund IV.

The Toronto private equity firm said this week it invested in McKeil Marine, a Canadian marine transportation and project services provider. Terms were not disclosed.

TorQuest partnered with existing management and shareholders. They include Steve Fletcher, McKeil’s newly appointed chief executive. He succeeds Blair McKeil, now vice chairman, whose family founded the business 60 years ago.

In a statement, Fletcher said TorQuest’s backing will enable McKeil to invest in its crews, expand its fleet, and build on its current operations across the Great Lakes, St. Lawrence Seaway, East Coast and Canadian Arctic.

The McKeil investment comes on the heels of TorQuest’s acquisition of natural-stone producer Polycor in September. That transaction had several moving parts, as TorQuest also financed the merger of Québec’s Polycor with U.S.-based Swenson Granite Works and affiliate Rock of Ages.

TorQuest emerged from the deal as owner of the largest dimensional-stone business in North America.

Polycor and McKeil are respectively the seventh and eighth platform deals of TorQuest Partners Fund III. Their closings bring the fund to full investment.

Pivot to Fund IV

TorQuest’s energies will now be primarily focused on sourcing new opportunities for TorQuest Partners Fund IV. Closing at its $925 million hard-cap target in June, the fund is the largest in the firm’s history, surpassing by 73 percent the $535 million secured by its predecessor in 2013.

Brent Belzberg, Senior Managing Partner, TorQuest Partners
Brent Belzberg, senior managing partner, TorQuest Partners

Senior Managing Partner Brent Belzberg said Fund IV realized an ambition to grow and diversify TorQuest’s base of limited partners.

“We could have closed Fund IV with existing LPs, but we made a purposeful decision to expand the number of investors beyond our institutional base in Canada,” Belzberg said. “We succeeded in signing on every kind of investor, including blue-chip U.S. and international LPs.”

This provided Fund IV with the right “balance” and an ability to invest over a longer term than Fund III, which was wrapped up in three and a half years, he said.

Eric Berke, Managing Partner, TorQuest Partners
Eric Berke, managing partner, TorQuest Partners

Managing Partner Eric Berke said TorQuest’s brand “resonated” with LPs because of its 14-year track record. Performance was recently bolstered by a string of exits, including last December’s sale of cosmetics merchandising specialist Array Marketing to Carlyle Group.

TorQuest also said this week it sold Global Traffic Technologies, a U.S. traffic-control-solutions business, to Gilbarco.

“We look to invest in great companies and management teams, and when we go to sell, we sell a bigger and more sophisticated business capable of attracting multiple buyers,” Berke said.

More and larger deals

Fund IV’s strategy will show continuity with TorQuest’s prior funds, Belzberg and Berke said.

The fund will make control-stake investments in Canadian and U.S. mid-market companies, most of them in sectors that are central to TorQuest’s investment thesis, such as consumer products, financial services, industrial services and specialty chemicals.

In addition to investing longer, the fund’s deeper capital pool will enable TorQuest to undertake more transactions, including corporate carve-outs, MBOs, recaps and successions. It will also be in a position to do larger-sized deals with enterprise values of as much as $500 million.

Targeting the sweet spot

Over the next 12 to 24 months, TorQuest will tap its “strong deal pipeline” with the aim of completing about two platform investments per year, Belzberg said.

The firm will step cautiously in an uncertain economic environment and keep tabs on pricing, Belzberg said. He is nonetheless optimistic about locating opportunities in TorQuest’s “sweet spot,” a confidence rooted in the firm’s ability to do complex deals, such as Polycor’s multipart acquisition, and build large platforms.

Belzberg, one of Canada’s best-known buyout veterans, led merchant bank Harrowston before he and Berke co-founded TorQuest in 2002. Today the firm has some 19 investment pros, including Partners Matthew Chapman, Michael Hollend, Alan Lever and Daniel Sonshine.

TorQuest has added personnel of late and is planning to further expand and develop the investment team, Berke said.

Photo of McKeil Marine vessel on St. Lawrence River courtesy of McKeil Marine Ltd

Photos of Brent Belzberg and Eric Berke courtesy of TorQuest Partners