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December 14, 2007

Private Equity Executive Launches Turnaround Firm

Private Equity Executive Launches Turnaround Firm Insight Equity Managing Director Ross Gatlin has left the firm he co-founded to start his own turnaround shop, Prophet Equity LLC, which will begin raising its debut $200 million fund next year.

Gatlin left Carlyle Groupís turnaround arm to start Insight Equity in 2002. He described his latest move as a friendly departure, saying he felt like heíd developed a strong enough track record to start his own firm. He remains an Insight Equity limited partner and continues to sit on the boards of portfolio companies he helped acquire when he was with the firm.

Private Equity Insider earlier reported the news of Gatlinís new firm. Prophet Equity has been in the works since Gatlin left Insight Equity in July, although it officially launched this week. The firm is looking to invest $5 million to $50 million in underperforming companies worth $10 million to $250 million. It will be tracking smaller deals than Insight Equity, which buys companies worth up to $500 million.

The firm is targeting $200 million with a hard cap of $250 million for its debut fund, Prophet Equity I. The firm doesnít have a placement agent and is looking for one. Gatlin isnít waiting for the fund to close before sourcing deals, saying he has $100 million of capital available right now from himself and potential co-investors, whom he declined to identify.

The credit crunch and other economic difficulties are putting pressure on small companies, Gatlin said, providing plenty of turnaround opportunities in the smaller end of the market, a segment he felt was often neglected by private equity.

Gatlin and Prophet Equityís team of buyout, turnaround and investment professionals plan to take a hands-on approach to their investments, and expect to close two or three deals a year. Senior team members have key strategic, operational and financial engineering experience, having served as executives in numerous buyouts, turnarounds and value creation success stories.

Prophet Equity has hired two other junior professionals so far, though Gatlin says their staff should top out at 15 or so when it closes its fund in late 2008 or early 2009.

Gatlin isnít the only buyout veteran to recently strike out on their own with a small-buyouts-focused turnaround firm. Peter Shabecoff left North Castle Partners LLC in 2006 to raise $100 million for Atlantic Street Capital Management LLC, which buys underperforming consumer products businesses.

Reach Prophet Equity at 817-898-1501.

Featured in Dowjones LBO Wire December 14, 2007.

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