- Thursday October 6, 2005
On October 1st, Detroit-based Peninsula Capital Partners L.L.C. held its first and only closing on its fourth mezzanine and structured equity partnership. The Peninsula Fund IV L.P. garnered $335 million of capital commitments from an overwhelmingly institutional investor base, including most Fund III investors. The Fund exceeded its fund-raising target of $300 million and was fully committed within several months of its launch.
As was the case for its previous partnerships, the General Partner raised the Fund entirely in-house without the assistance of a third-party fund-raiser organization. The General Partner’s President & Chief Investment Officer, Scott Reilly, principally coordinated the effort, which met with much enthusiasm from existing LPs and the marketplace in general, resulting in an oversubscribed situation and the need to scale-back some LPs investment amounts.
“We are equally pleased and humbled that Fund IV was so warmly received by both old and new investors.” stated Mr. Reilly. “Although we knew we had a strong track record and an unique investment style, we were unsure as to how the market would react to another mezzanine fund at a time when the conventional wisdom is that the mezzanine market is both over-funded and facing new forms of competition.” Mr. Reilly added.
Most of Fund IV’s capital was committed by Fund III investors, leaving room for only a handful of new LPs to invest in the Fund. “We were fortunate to receive much support from our legacy investors as well as to gain a few new blue-chip investors. We prefer to have a small group of investors who are committed to the asset class and who can appreciate our investment approach.” Mr. Reilly explained.
Peninsula Fund IV has the same investment objectives as its predecessors, namely focusing on mostly unsponsored transactions in the lower end of the middle market. The Fund will provide sub debt or equity, or combinations thereof in amounts from $4 million – $40 million, or even larger amounts in conjunction with its LPs.
Mr. Reilly offered, “Doing unsponsored deals has always been the cornerstone of our investment philosophy, but it is not all we do. We have a number of relationships with buyout groups that view us a valued partner, and we also have co-sponsored a fair number deals with unfunded sponsor groups.”
Fund IV was preceded by a $271 million Fund III that closed in 2001, a $143 million Fund II that closed in 1998, and a $53 million Fund I that closed in 1996. Funds I & II are functionally fully invested and have thus far returned 151% and 131% of contributed capital to its investors. Fund III is close to being fully invested and has already returned nearly half its investors’ capital.
Scott A. Reilly, CFA
President & Chief Investment Officer
From the very beginning, we have had a very collaborative and enjoyable partnership with Peninsula. We built camaraderie through challenges that could stress relationships. We have had numerous complicated issues to resolve and they continue to help us find solutions. Their team brings a very desirable combination of experience, skills, and integrity. Our team has really enjoyed the partnership and we look forward to working together for many years to come.”
It has been a pleasure to work with the people at Peninsula. During good times, they have been supportive of our growth. When our business faced challenging economic times, their trust in our management team, financial support and willingness to adjust our capital structure helped to navigate to a stable and healthy position. Peninsula’s strong bank relationships are a key element to our business’ success.”
To find a partner that shared our passion was a prerequisite that we thought we’d struggle to find, but from the get go Peninsula showed a real understanding and empathy for our business and the people within it. We’re over a year in and we’re delighted with our decision and remain firmly on track to achieve our ambitious long-term goals.”
Partnering with Peninsula has been one of the best decisions we have made thus far as an independent sponsor. The team is highly disciplined, applies strong analytics and consistently displays a high level of integrity. Through good times and bad, Peninsula has proven to be a valuable partner, providing solid guidance and support to management teams and independent sponsors alike. While risk mitigation is always front and center, Peninsula is adept at finding smart and creative ways to help companies grow while maintaining a strong and vibrant work culture for employees to thrive.”
When we sold our company to Peninsula, I had many questions, and some anxiety, about how we would be treated post-deal. Seven years later, all of those questions have been answered. It could not be a more fulfilling (and successful) partnership.”
Peninsula has been an invaluable partner for Weave. Of the various capital partners we considered, Peninsula treated us like a true partner throughout the process, engaging in honest and transparent dialog. Post transaction, the Peninsula team continued to be aligned and cooperative partners, helping to professionalize the financials, inserting new management, and securing a larger warehouse. As a capital provider, Peninsula is singular in its understanding of, and flexibility in, working with independent sponsors.”
Over the past seven years, Peninsula Capital Partners has been instrumental in supporting the Burlington team’s transition from a small unsophisticated company to a global leader in the radiation protection industry. They have supported us through early challenges, led our strategic acquisition efforts, and they continue to act as an extension of our management team. In doing so, they understand our business and have embraced our company vision. We deeply appreciate the investment Peninsula Capital Partners has made in upgrading our manufacturing and computer technologies, but their most valuable contributions have been their partnership, support, and guidance.”
In my experience, strategic alignment of stakeholders is the most critical element of success for a private equity-backed business. The Peninsula team does a fantastic job of communicating with management to ensure such alignment. They create a true partnership, striking an ideal balance between guidance and autonomy, and have proven to be extremely skillful in creating the right environment for growth.”
We represented a client who had recently closed a transaction with Peninsula. It has been our experience that cultural fit is an important ingredient of a successful transaction. Our client had an instant connection with the Peninsula team, which carried all the way through negotiations, due diligence and the inevitable complexities that emerge in any transaction. The unique deal structure proposed by Peninsula was a compelling value proposition for our client and we look forward to their shared future success.”
Over the last several years, we have faced a unique challenge caused by COVID. When an industry experiences these types of shocks, all aspects of your business are tested, including key financial partnerships. During times of risk, most financial partners will look for ways to tighten controls and restrict how a company operates. James Illikman and Peninsula took a different approach and looked at the longer-term opportunity and invested the time and resources into making the business stronger.”
Chris Gessner and Peninsula have been our go-to capital partner for years now. Their ability and desire to work through difficult and challenging deal issues sets them apart from other capital partners. Chris is flexible and creative in negotiations with both sellers and independent sponsors and is transparent throughout the deal process.”
I strongly recommend that you consider Peninsula Capital as your business partner. Together, we have done so much more than I could have possibly done alone. They have guided my team and provided insight and resources which we’ve used to increase the value of my company substantially! My only regret is that I did not contact them earlier in the development of my company because I am having fun and attaining outstanding success by working with Peninsula Capital. Feel free to contact me if you have any questions related to this partnership with Peninsula Capital Partners.”