Compass Group Equity Partners, a St. Louis-based private equity firm, has closed Compass Group Fund III – hitting a hard cap of $408 million. This is Compass Group’s second fundraising effort in the past two years and was achieved through a first and final closing this week after launching fundraising efforts late last year.
Compass Group’s background as an independent sponsor led to representation in Fund II, closed in April 2022, from fund-of-funds and family offices among a diverse set of limited partners. Along with solid carryover from existing Fund II limited partners, the firm intentionally curated new investors for Fund III, supporting representation from insurance companies, endowments, registered investment advisors, and foundations.
Since its first investment in 2015, Compass Group invested in 14 portfolio companies and more than 230 bolt-ons and has completed four exits at returns exceeding expectations.
Compass Group has a thematic investment strategy in the lower middle market by analyzing and researching subsectors that exhibit strong macroeconomic trends within niche manufacturing and distribution and business and consumer services industries. And they aim to partner with target companies that possess the following characteristics:
1.) Successful entrepreneur and family-owned companies that have reached an inflection point for growth and want continued participation and partnership in the business and where the Fund would represent the first institutional capital
2.) Mid-America “Between the Mountain Ranges” geographic focus, which aligns well with Compass Group’s Midwestern presence and values
3.) Financial characteristics include EBITDA between $2 million and $15 million, enterprise values of $20 million to $200 million, substantial margin, and cash flow generation.
McGuireWoods served as legal counsel for this fund, and Aqueduct Capital Group provided placement agent services.
KEY QUOTE:
“We are very proud of the firm we’ve built over the last decade. Hard work and dedication from the team has helped us deliver on our strategy of thematic research, proprietary deal sourcing, partnering in value creation, and ultimately successful outcomes. The support from our limited partners validates our investment strategy, our people, and the strength of our portfolio. We are appreciative of both new and existing investor support that enables us to continue our mission to grow great companies.”
– Managing Partner John Huhn
