New Harbor Closes Fund III

New Harbor Capital has closed its third private equity fund, New Harbor Capital Fund III LP (Fund III), with $362 million in capital commitments. The firm’s new fund was oversubscribed and closed at its hard cap in just over three months of fundraising.

Chicago-based New Harbor invests from $10 million to $40 million of equity in companies that have from $3 million to $15 million of EBITDA. Sectors of interest include education, healthcare, and tech-enabled services sectors.

New Harbor was co-founded in February 2013 by Tom Formolo and Ed Lhee, long-time partners at CHS Capital.

“We are deeply grateful for the support of our Fund II investors and their continuing partnership with us in our third fund,” said Mr. Formolo. “We are also excited about the variety of new investors that are joining us in Fund III. We remain fully committed to investing in high growth, founder-owned businesses in the lower middle market that value our partnership approach and extensive experience building industry leaders.”

New Harbor’s earlier fund, New Harbor Capital Fund II LP, closed in June 2017 with $265 million in capital and its first fund closed in March 2015 with $146 million of capital.

“All of our funds have included significant capital commitments from our team of executive advisors,” said Mr. Lhee. “This impressive team of 11 founders and former CEOs of private equity-backed companies is vital to our success by providing us critical market insights, assisting in sourcing differentiated investments, and advising our portfolio companies and management teams.”

In January 2021, New Harbor announced that two new executive partners had joined the firm with the additions of Pat Bauer and Tom West. Mr. Bauer is the CEO of Heartland Dental, a provider of business and administrative services to dental practitioners (DSO) and a former portfolio company of New Harbor. The firm acquired Heartland Dental in 2008 and sold the company to Ontario Teacher’s Pension Plan (OTPP) in 2012.  KKR acquired Heartland from OTPP in 2018. Today, Heartland is the largest DSO in the world with over $2 billion in revenue and more than 1,100 offices. Mr. West is the current CEO of AffiniPay, a provider of electronic payment services to the legal, accounting, architecture and design, and associations markets. AffiniPay was acquired in 2020 by TA Associates from Great Hill Partners.

New Harbor has been active recently realizing cash-on-cash returns for its limited partners. In December 2020, New Harbor closed the sale of three portfolio companies: Certica Solutions, a Massachusetts-based provider of K-12 assessment and analytic services to Instructure, a portfolio company of Thoma Bravo; Community Psychiatry Management, a California-based provider of outpatient behavioral health services, to Centerbridge Partners; and Wedgewood Pharmacy, one of the largest veterinary drug compounders in the United States, to Partners Group.

Kirkland & Ellis provided legal services to New Harbor on this fundraise.

© 2021 Private Equity Professional | February 11, 2021

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