Fund­ing pro­vided to proven com­pa­nies

Eq­uity

Austin American-Statesman - - BUSINESS - B In­vestors in­clude fi­nan­cial in­sti­tu­tions, en­dowed trusts. Con­tact Lori Hawkins at 912-5955.

cial­iza­tion,” said Jim McBride, Blue Sage co­founder and man­ag­ing mem­ber. “We really like to in­vest in com­pa­nies that are the lead­ers in niche mar­kets. That’s where a fund of our size can make a dif­fer­ence.”

Pri­vate eq­uity funds dif­fer from ven­ture cap­i­tal funds in the type of com­pa­nies they back. Ven­ture cap­i­tal­ists usu­ally in­vest in young, un­proven com­pa­nies, while pri­vate eq­uity firms seek proven com­pa­nies that need money to grow.

This is the sec­ond fund for Blue Sage, which raised $170 mil­lion in 2003 from in­vestors in­clud­ing Frost Bank, Wells Fargo, the state of New Mex­ico and the state of Ok­la­homa.

The firm in­vested that money in 13 com­pa­nies, many of them fam­ily-run busi­nesses in niches that aren’t usu­ally pur­sued by pri­vate eq­uity in­vestors. Deals in­cluded man­nequin maker Fu­sion Spe­cial­ties of Colorado; Parker School Uni­forms in Hous­ton and one Austin in­vest­ment: pizza chain Mr. Gatti’s Inc.

Of the 13 com­pa­nies, five have been ac­quired and the oth­ers re­main ac­tive.

Those sold in­clude Om­ni­flight, an air med­i­cal trans­port com­pany based in Ad­di­son, to a Chicago pri­vate eq­uity firm. That deal re­sulted in more than a 100 per­cent an­nual rate of re­turn for Blue Sage, ac­cord­ing to reg­u­la­tory fil­ings.

Most re­cently, Blue Sage prof­ited from the sale of R360 En­vi­ron­men­tal So­lu­tions, a Hous­ton-based provider of non­haz­ardous oil­field waste treat­ment, which was bought by Waste Con­nec­tions, also of Hous­ton, for $1.3 mil­lion in cash in Septem­ber. Blue Sage made eight times its $10 mil­lion in­vest­ment, ac­cord­ing to pub­lic records.

“Our per­for­mance gave us a huge launch­ing pad as we moved into fundrais­ing for Fund II,” McBride said. “It took us 12 months, whereas the av­er­age time for pri­vate eq­uity fundrais­ing is north of two years.”

The firm ini­tially in­tended to raise a sec­ond fund of $100 mil­lion, but in­creased the size be­cause of in­vestor in­ter­est, said Peter Huff, co-founder and man­ag­ing mem­ber.

In­vestors in the fund in­clude large fi­nan­cial in­sti­tu­tions, pri­vate eq­uity funds, prom­i­nent fam­ily of­fices, en­dowed trusts, government en­ti­ties and Blue Sage part­ners.

Huff said the firm, which has five in­vestors, will spend the next three to four years in­vest­ing the fund.

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