Speyside Equity Advisers LLC (“Speyside”) announced the final close of Speyside Equity Fund II (“Fund II”) hitting its hard cap of $300 million in capital commitments, significantly surpassing its original target with requests in excess of the hard cap. Fund II represents Speyside’s third investment vehicle, following the successful deployment of Fund I and the Speyside Equity Opportunity Fund. The fund was significantly oversubscribed, reflecting continued strong support from existing limited partners and meaningful participation from a global group of new investors. Fund II’s investment capacity is further expanded by affiliated co-investment vehicles. Fund II has already invested in Reed Minerals and GSC Technologies as platform companies to date.
Executing a Fix and Build Strategy in the Manufacturing Industry
Led by its Investment Committee – Eric Wiklendt, Nick Lardo, and Kevin Daugherty – Speyside acquires underperforming manufacturing businesses in the lower middle market, improves them, and then grows them. The firm works closely with its operating partners and management teams to improve EBITDA margins back to industry level standards and then grow sales through organic and acquisitive actions using Speyside’s proprietary portco value creation system (PVCS). The PVCS is a phased, process driven approach that uses a set of specific tools, frameworks, and examples to facilitate deal theses identified during operational due diligence. The system is the distillation of twenty years of experience of its partners from managing, buying, and improving manufacturing businesses.
Learning from the Past – Improving for the Future
Based on pre-fund, Fund I, and Opportunity Fund experience, Speyside took actions to focus its fund strategy and fuel it with top graded human capital and continuous improvement actions. While Speyside will look for bolt-on acquisitions anywhere in the world, Fund II focuses on platform investments in North America. Structural and transformational control are key aspects to creating better return on effort and allows Speyside to use low leverage deal structures to allow management teams to focus on planned transformations. The goal of the improved strategy is to create better risk weighted returns.
Eric Wiklendt noted, “We really learned a lot from Speyside Equity Fund I and Speyside Equity Opportunity Fund, and we are putting those learnings into action in Fund II. Implementing those changes are like getting rid of a stone around our ankle while trying to swim. Ultimately, we are seeing the benefits of addition by subtraction. Taking a process driven approach allows us to generate scalable, repeatable value creation. We have augmented the team with several new team members over the last year in order to execute the plan.”
Global Investor Support for Speyside’s Approach
Fund II attracted a broad and global base of institutional investors, including family offices, endowments, foundations, private investment firms, RIAs, and funds of funds.
“We are excited about the portfolio of investors we have assembled,” said Nick Lardo. “Given the headwinds in the fundraising market, the quality of our LP portfolio speaks very positively about the industry’s assessment of our strategy.”
