American Capital spinout holds first close on Fund II

The vehicle, which is targeting $375m, is Northlane Capital’s first as an independent manager.

Northlane Capital Partners has held a first close on its second fund, which is targeting $375 million.

The exact amount of the first close is not known, but more than 50 percent of the target was collected, according to three sources.

Northlane did not respond to requests for comment.

The Maryland-based mid-market firm spun off from American Capital when the latter was acquired by Ares Capital Corporation in January 2017. At the time, Northlane assumed management of American Capital Equity III, which closed on $1 billion in 2014, and renamed it Northlane Capital Partners I (NCP I).

The $1 billion NCP I was a combination of pre-existing capital and $360 million of stapled capital from new investors including Coller Capital, Goldman Sachs Asset Management and StepStone Group, two sources said.

This makes Fund II “technically slightly larger” than its predecessor, a source said. This is driving LP interest in the fund.

Northlane gave LPs in its previous fund liquidity through the sale of venue management company SMG Holdings to Onex Corporation in December 2018. The firm is also chasing a large acquisition, the source said.

Northlane’s four founding partners – Justin DuFour, Sean Eagle, Eugene Krichevsky and David Steinglass – have received attribution for their investments in American Capital, something which is often not the case for spinout teams.

Northlane’s current portfolio is a mix of new investments and those executed by the partners at the predecessor firm, the source said.

Recent acquisitions include sales intelligence content provider List Partners, contract research organisation Firma Clinical Research, and Discovery Data Holdings, an information services provider.

Northlane invests in healthcare and business services companies with enterprise values between $50 million and $300 million that generate an EBITDA of between $5 million and $30 million.

Fund II will build a portfolio of 10 to 12 businesses requiring equity investments of up to $75 million, according to Texas Municipal Retirement System’s documents. The pension system committed $60 million to Fund II.

Northlane has engaged the services of Sixpoint Partners, a specialist advisor serving the mid-market private equity industry, according to a Form D dated 25 June filed with the Securities and Exchange Commission.

The firm managed $466.9 million in discretionary assets as of 31 December, according to its Form ADV.