A well-heeled group of Denver financiers – KRG Capital Partners – has quietly established the largest Colorado- based leveraged buyout fund in state history.
The $715 million fund, KRG Capital Fund III, will be used to make billions of dollars worth of corporate acquisitions across North America, company officials said.
Leveraged buyout firms use borrowed money to acquire companies, often using the company’s own assets as collateral.
KRG began to amass the fund – from insurance companies, state pension funds and universities – in December. It wrapped up its latest effort after exceeding an initial goal of raising $600 million.
When combined with two of its other funds, KRG has raised nearly $1.4 billion during the last six years.
KRG, which owns 13 companies overall, is hunting for companies in energy, health care, advertising, finance and construction.
In Colorado, the group owns Longmont’s Case Logic, a manufacturer of compact disc cases, and until July was controlling owner of Denver’s HMS Healthcare Inc., a large preferred provider network. PPOs act as intermediaries between insurance companies and doctors.
Earlier this week, KRG paid an undisclosed amount for the new fund’s first acquisition: The Focus Corp., an Alberta-based engineering and land-development consulting firm employing 600.
Strong growth potential in Western Canada’s energy and infrastructure industries made Focus attractive, said Charlie Gwirtsman, one of five KRG managing directors. The others are Mark King, Bruce Rogers, Chris Lane and Chuck Hamilton.
Besides Focus, KRG soon plans to buy two more so-called “platform” companies, which Gwirtsman defined as those poised to purchase smaller “add-on” companies with the intent of increasing the value of each.
One of the acquisitions will be announced today, with the other coming within six months, company officials said.
Worldwide, private equity funds have raised more than $153 billion so far in 2005, already topping the $147 billion raised in 2004, according to London-based research firm Private Equity Intelligence Ltd.
Buyout firms, which include KRG, have raised more than $100 billion in 2005, up from $67 billion last year.
Private equity fundraising “is robust,” said David Snow, the U.S. editor for Private Equity International, a New York-based monthly magazine. “Right now there is a definite boom in the leveraged buyout industry.
That boom, Snow said, contrasts to three or four years ago when private equity fundraising was “in the doldrums.”
“It’s completely reversed,” he said.
Even so, only companies with the strongest track records are easily finding capital, Snow said.
“It’s a tale of haves and have nots,” he said. “A lot of buyout firms with undistinguished investment returns are having trouble raising money. It’s an indication that (KRG’s) track record is perceived to be pretty good.”
Staff writer Will Shanley can be reached at 303-820-1260 or wshanley@denverpost.com.
