Falcon Investment Advisors
is seeking a larger pool of
capital than previously raised to make mezzanine investments, said
people with knowledge of the fundraising effort.
The Boston firm is looking to
raise $850 million for Falcon Strategic Partners IV LP and has already
held an initial close on commitments of $300 million toward the fund,
said the people. The mezzanine fund is capped at $900 million, those
people added.
If Falcon reaches its $850
million goal, the fund will be more than $100 million larger than its
third pool of capital, Falcon Strategic Partners III LP, which closed on
$728.9 million in 2009.
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Founded in 2000 by Sandeep
Alva and William Kennedy, Falcon makes mezzanine investments of $10
million to $75 million in companies with annual earnings before
interest, taxes, depreciation and amortization of more than $10 million.
Falcon recently backed the buyout of Tampa-based online retail
advertising company Triad Retail Media LLC by RockBridge Growth Equity
at the end of last year and the recapitalization of MSX International
Inc. in early 2012.
The debt provider is
fundraising in a crowded market this year as a glut of shops across the
private equity spectrum solicit investors for commitments. Falcon is
competing against a lack of interest in mezzanine funds compared with
other fund types on the market.
Investors surveyed by data
provider Preqin said allocating capital into a mezzanine fund was less
of a priority than buyout or venture capital. About 22% of investors
said they were seeking mezzanine funds to invest in sometime in the next
12 months from October, which was tied with interest in secondary funds
and beat demand for natural resource strategies, which commanded the
interest of 9% of limited partners.
Meanwhile, 63% of investors
wanted to invest in buyout funds, 49% sought venture capital investments
and 38% took aim at growth vehicles, Preqin said.
Falcon's third fund had a net
internal rate of return of 17.6% and a multiple of 1.27 times as of
March 31, according to a document provided by one investor in the fund.
Falcon's second fund, named Falcon Mezzanine Partners II LP, had a net
IRR of 7.6% and a multiple of 1.35 times, according to the document.
Fund II had raised $440 million in 2005.
Falcon's debut fund closed in 2003 after collecting $223 million from investors.
One investor already committed to Fund IV is the
Florida State Board of Administration
, which pledged $100 million.
Placement agent
Atlantic-Pacific Capital Inc
. is assisting Falcon with the fundraising, according to a
Securities and Exchange Commission
filing in September.
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