GTCR collects $2 billion from existing investors for new growth fund
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2 min read . Updated: 26 Jan 2022, 06:54 PM IST The latest fund will help the firm invest in smaller deals in its target sectors
GTCR didn’t have to go far to round up $2 billion for a new fund strategy focused on smaller deals.
The Chicago-based private-equity firm raised the GTCR Strategic Growth Fund by relying exclusively on relationships with investors that backed its latest main buyout fund, which closed with $7.5 billion in investor commitments in 2020, according to Collin Roche, co-chief executive and managing director at the firm.
Mr. Roche said the firm focused on raising the growth fund through existing limited partner relationships rather than marketing to new ones, thanks partly to the strong support the firm has received from existing LPs over the years.
The new fund, which exceeded the $1.5 billion target previously reported by WSJ Pro Private Equity, aims to make investments of less than $200 million in companies from sectors that GTCR already invests in through its other funds, according to Mr. Roche. The sectors include financial technology and services, technology, media and telecommunications, healthcare and growth business services. Often, smaller companies can be more agile and entrepreneurial, Mr. Roche added.
“In some of our categories, the smaller companies have so much growth and such an interesting profile that if you don’t acquire them when they’re small you may never get the opportunity again," he said.
GTCR’s main funds have steadily increased in size over the past decade. The most recent, which closed with $7.5 billion in 2020, was around 43% larger than a $5.25 billion predecessor that closed in 2017. The firm makes equity investments ranging from $200 million to over $1 billion out of its main funds, Mr. Roche said.
The firm has already backed its first investment out of the new growth fund, which held a first closing in November 2021, Mr. Roche said. In January, it backed a joint venture with publicly traded Cable One Inc. and other investors to support Clearwave Fiber LLC, a newly formed communications company created through the combination of Cable One subsidiary Clearwave Communications and certain assets from another Cable One subsidiary, Hargray Communications.
“Broadband access has been a key investment thesis for us across several funds," Mr. Roche said, adding that the investment gave the firm an opportunity to invest in rural areas and markets underserved by broadband.
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The investment typifies GTCR’s investment approach of collaborating with management teams to build businesses that “often look very different" when the firm exits them, according to GTCR co-CEO and Managing Director Constantine Mihas. “We will start with a management team before we even have any assets and we’re out looking for a company to buy and build with that management team," Mr. Mihas said.
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