- Fund IV targets high-growth industrial and consumer companies
- Half the corpus already deployed, bolt-on acquisitions underway
- Legacy portfolio expected to be fully realized within 24 months
Leadership transitions can be tricky to navigate in private equity, but CCMP Growth Advisors has closed the first fund of its new era with over half of the USD 500m corpus already deployed and most of the legacy assets from earlier vintages fully realized.
“We were careful not to categorize ourselves as a Fund I, because we’re not,” said Joe Scharfenberger, a co-managing partner at the firm. “It’s essentially the same – the team has been working together on the consumer and industrial sides of CCMP investing activities for the last 10 years-plus.”
Joe Scharfenberger, CCMP Growth Advisors’ co-managing partner.
He credits LPs from earlier funds for re-upping in CCMP IV, which came in above target, although there plenty of new investors as well. In addition to pension funds, insurance companies, financial institutions, family offices, and high net worth individuals, the LP base features 25 executives or board members from past portfolio companies. CCMP III, the final vintage under CCMP Capital Advisors, closed on USD 3.6bn in 2014.
The new fund has a narrower focus, concentrating solely on high-growth, middle-market consumer and industrials companies in North America. The sweet spot for new deals is businesses with more than 10% in annual revenue growth and EBITDA of USD 15m-USD 75m.
Mark McFadden, CCMP Growth’s other co-managing partner, noted that the firm looks to keep leverage levels moderate – around 3x-4x EBITDA in the current environment, “so we can accelerate the organic growth” through new location openings, capacity expansion, and investment in sales and marketing. “And then we supplement this with M&A,” he explained.
Mark McFadden, CCMP Growth Advisors’ co-managing partner.
The four completed platform investments are car wash operator Mammoth Holdings, roofing provider Omnia Exterior Solutions, marine contractor Decks & Docks, and refrigeration engineering group Innovative Refrigeration.
“We love sub-sectors where the use of technology is helping companies in what you might consider older economy sectors of the industrial or consumer economy differentiate and take share,” said McFadden, citing Omnia as a key example.
He sourced the investment through a longtime relationship in the roofing industry and CCMP Growth installed a new management team. There have since been 10 bolt-on acquisitions with an emphasis on introducing digital tools for customer experience management and consolidating back-office functions to improve efficiency. Jeff Kizilbash, CEO of Dallas, Texas-based Omnia, told Mergermarket last month that another acquisition could come this quarter.
Clearwater, Florida-based Decks & Docks has also made two acquisitions – Excelsior Lumber and Fence & Deck Direct. “We’ll hopefully have a third under letter of intent in the next couple of weeks,” said Scharfenberger.
CCMP Capital was formed in 2006 through a spinout from J.P. Morgan, and McFadden and Scharfenberger joined either side of that event. They remain managing partners of CCMP Capital and CCMP Growth.
Greg Brenneman, Timothy Walsh, and Richard Zannino, the other three investment committee members at CCMP Capital, are advisory board members at CCMP Growth.
In 2021, the year before CCMP Growth was established, CCMP Capital raised a USD 948m continuation vehicle for two Fund III portfolio companies: facility management services provider BGIS and truck accessory supplier Truck Hero.
“There’s not really any assets left in CCMP III to speak of…hopefully that’ll be fully monetized within the next 12 to 24 months, and then we have a continuation vehicle which is largely made up of one business,” said Scharfenberger.
Ropes & Gray served as legal advisor to CCMP IV, while CrossBay Capital Partners and Spartan Advisors served as placement agents in North America and Europe, respectively.
