Project Northstar is a secondary investment in four funds managed by Alpine Investors, LP, a North America-based private equity firm that seeks to make control buyout investments in corporate carve-outs and founder-owned middle- and lower-middle market North America-based companies in the software and services sectors. GCM purchased the interests in the four Alpine funds (Alpine Investors III, IV, VI and VIII) at an aggregate discount to the 30 September 2019 NAV of 7%, although the discount is expected to be approximately to 20% relative to the 31 December 2019 NAV due to the strong performance of the underlying investments in those funds.

This transaction was consistent with our strategy of targeting niche secondary opportunities with difficult to access, strong performing managers who restrict secondary investors in their funds to investors who are also primary fund investors with such managers.

In addition to the information advantage we had as an existing investor with Alpine, we were able to leverage our existing relationship with the manager during due diligence in order to enable us to granularly assess the underlying companies in the funds and determine the appropriate discount to bid for the portfolio – this discount was based in part on our belief that there is reasonable potential upside within the portfolio that should help drive returns.

Founded in 1988, the Riverside Company is a global private equity firm focused on acquiring companies in the smaller end of the middle market. The Riverside Company established RMCF V to invest in fast-growing, North American companies with generally less than US$10 million in LTM EBITDA (“micro-cap companies”) and seeks to grow the EBITDA of such companies organically and through add-on acquisitions. RMCF V targets what they consider to be high-growth companies with compelling value propositions, which often lack the institutional-quality resources required to reach their full potential. The firm aggressively seeks to unlock value by applying active strategic and operational expertise and by giving these companies access to the resources they need to enhance their growth. 

Through its core investment strategy of control buyouts, RMCF V will seek to create a diversified portfolio of approximately 12 to 18 micro-cap companies. The firm believes that its local, hands-on approach, supported by significant global resources, provides a distinct competitive advantage in generating attractive returns.

Founded in 1977 and headquartered in Philadelphia, Pennsylvania, ERT is a leading global cloud platform solutions provider to pharmaceutical companies and clinical research organisations throughout the clinical trial process. ERT is a leader in each of its three core business lines, which together represented 92% of ERT’s 2018 revenue:

1. Electronic Clinical Outcome Assessment, which focuses on digitally collecting clinical subjective data from patients or clinicians through diaries or questionnaires that they complete during clinical trials,
2. Cardiac Safety, which focus on collecting and centrally analysing cardiac function data using Electrocardiogram monitors in order to assess potential cardiovascular side effects of drugs, and
3. Respiratory Services, which evaluates a patient’s lung function using specific devices such as spirometers in order to measure efficacy and safety of a drug. Over 55% of all new drug approvals in the past five years were supported by ERT.

MAC II co-invested in ERT alongside Nordic Capital, an upper middle market buyout manager with extensive experience in the healthcare sector and deep knowledge of ERT from its prior ownership of the company. In addition to Nordic Capital’s clear value add, MAC II pursued this investment opportunity due in part to:

1. ERT’s market leading position in each of its three core business segments as well as the company’s growing footholds in a number of recently entered segments, including imaging and trial oversight, which are fast growing and present excellent opportunities for cross-selling,
2. the company’s high revenue visibility and strong cash flow generation with actionable organic opportunities to expand capabilities and enhance service offerings, and
3. the fact that the market is cycle-resistant with high barriers to entry and has been expanding at a rapid pace (which is projected to continue over the next five years).

Founded via corporate carve-out in 2004 and headquartered in Cranbury, New Jersey, Innophos is a leading global producer of ingredients, primarily phosphate-based, which are used across the food, health, nutrition, and industrial end markets.

GCF II co-invested in Innophos alongside One Rock Capital Partners (ORCP), a middle-market buyout manager with specialised expertise in the chemicals and process industries. GCM found this co-investment to be compelling for a number of reasons, including:

1. Innophos is the #1 phosphate additive player in the highly stable North American food, industrial, and health end markets,
2. there is a significant opportunity for material EBITDA improvement through the execution of operational efficiencies and pricing initiatives that have already been identified by ORCP, and
3. ORCP has assembled a strong team with intimate working knowledge of Innophos, its chief competitor (ICL), and the phosphate industry at large.