MiddleGround touts Fund II close at $736m

Lexington, KY-based MiddleGround Capital closed a series of its funds, including its flagship fund MiddleGround Partners II, MiddleGround Partners II-Z and Mobility Opportunity Fund, with $736 million at the end of April. Among the investors in the latest round was the nearby Kentucky Public Pensions Authority, committing $75 million to the MiddleGround Partners II in March. That fund was launched in January due to strong demand from incumbent investors. MiddleGround II-Z is a parallel co-investment vehicle which will invest alongside Fund II. The Mobility Opportunity Fund is dedicated overflow vehicle focused on investments in the future trends of the automotive industry including electrification of the powertrain, vehicle light weighting, connected and autonomous vehicles. MiddleGround’s debut fund, which the Kentucky Retirement Systems allocated to in 2019, saw $460 million in commitments and that initial fund deployed capital so quickly in 2020 that the firm decided to launch a second fund. Fund I is close to 70% deployed today across seven platform deals, according to an investment consultant’s recent analysis. MiddleGround is said to anticipate doing two more platform investments and two more add-on acquisitions in Fund I before starting to invest Fund II later this year. Expected pacing and portfolio construction remains the same at one to two platform investments per year and 10-12 portfolio companies in Fund II. The firm has put significant resources toward deal sourcing, which targets buyout investments in profitable US companies with enterprise values of $75 million to $300 million. Since its 2018 inception, MiddleGround with a focus on control investments in B2B industrial and specialty distribution companies, has made 10 acquisitions, and invested over $620 million. The firm’s investments are comprised of seven platforms and three add-on acquisitions. Six of these transactions were completed during the pandemic in 2020. The growth in MiddleGround’s portfolio is mirrored in the growth of its team, which now stands at 43 professionals between its Kentucky and New York offices. The firm is headed by John Stewart, Lauren Mulholland, Scot Duncan and Monica McClinton. Stewart and Duncan worked together at Toyota Motor Corporation before moving into private equity in 2007 and 2008. “It is an exciting time to be working in private equity,” Stewart, founding partner. “The time for making money at the expense of the planet, the employees in our companies, and without transparency has passed. Over the last three years, we have built our firm based on an understanding that our investors are our customers and that we need to be responsive to their needs.” The firm’s focus is to create value via a hands-on operational approach. The investment strategy for MiddleGround’s second fund is in line with its initial offering in that the team eyes high quality industrials businesses with definable value creation plans. The new fund will employ a thematic approach in certain sectors, investing behind identified trends in mobility, infrastructure and industry 4.0.

MiddleGround touts Fund II close at $736m

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