Private equity pioneer GTCR, which last year closed a 14th flagship fund, is seeking $3 billion for a second mid-market buyout offering.
The target for GTCR Strategic Growth Fund II was disclosed this month in Massachusetts Pension Reserves Investment Management documents. The vehicle’s hard-cap is not known.
Launched in September, Fund II is expected to wrap up early next year, sources familiar with the offering told Buyouts. GTCR declined to comment.
Fund II arrived roughly three years after the $2 billion close of the Chicago manager’s inaugural fund for the strategy. GTCR Strategic Growth Fund I was targeting $1.5 billion.
Led by managing directors John Kos and Stephen Master, the strategic growth platform was launched to execute the same longtime strategy of GTCR’s flagship funds but aimed at smaller buyouts.
As such, the platform focuses on control investing in North American mid-market companies in business and consumer services, financial services and technology, healthcare and technology, media and telecommunications sectors. GTCR writes equity checks ranging from $50 million-$250 million.
Targets are undermanaged, high-quality businesses providing mission-critical services and having strong free cashflows and an ability to become leaders in their markets, according to Boston Retirement System documents.
As with the flagship funds, investing by strategic growth funds is supported by the Leaders Strategy, which emphasizes partnerships with sector executives to identify, acquire and build companies organically and through M&A. GTCR has operated the strategy for more than 40 years.
Fund II is expected to make up to 18 investments, BRS documents said. It is targeting a 2.0x net multiple and a 20 percent net IRR.
Keen on mid-caps
The mid-market has recently been paid greater attention by LPs, owing in part to the space’s attractive entry valuations, Buyouts reported last month. Because they are small and less developed, mid-market companies are also highly responsive to value creation techniques.
GTCR is one of the industry’s oldest GPs. Founded in 1980, its original principals were Stanley Golder, Carl Thoma, Bryan Cressey and Bruce Rauner, whose names are linked with a number of renowned private equity brands. Today, the firm is led by co-CEOs Dean Mihas and Collin Roche.
Mihas oversees the strategic growth platform, BRS documents said. Along with Kos and Master, dedicated team members include managing director Don McDonough, who was hired in 2022 from JLL Partners to run business development.
Fund I’s deals include Avryo Healthcare, a platform for acquiring companies and assets in the healthcare services sector. Formed in 2022, Avryo this year invested in 7to7 Dental to build out dental facilities.
“We got started with Avryo with a smaller equity check and our thesis is to invest more capital over time in partnership with Kelly [McCrann] and the team,” Kos told PE Hub in April. “They want to open a lot more patient centers, which will require primary capital.”
The still-young Fund I was earning a 1.0x net multiple and a -2.9 percent net IRR as of June 2024, according to BRS documents
Together with GTCR Strategic Growth Fund II, the firm is currently raising a debut strategy earmarked primarily for minority, structured equity investing in mid-market businesses. GTCR Capital Solutions Fund is targeting $1.5 billion, Buyouts reported in June.
