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February 01, 2010

Prophet Equity Closes Its Debut Fund At $275M

2/1/2010 Prophet Equity has closed its debut fund at its hard cap for external limited partners, $250 million - and the vehicle still has room to grow.

In total, Prophet Equity LP raised $275 million, including a general partner commitment that could increase, Managing Partner Ross Gatlin told LBO Wire. The fund could expand to $300 million if deal value needs justify.

The distressed and turnaround firm wrapped up a process that began in mid 2008. Somewhat unusually, considering it is a debut fund, of not more than $275 million in size, and that it was a raised in the worst fund-raising environment in some time, the firm reeled in commitments from overseas investors, including Danske Bank Group and Danish retirement fund Industriens Pension.

"The space we're in, the track record we have, there is unique demand for this type of strategy," Gatlin said. "Institutional investors are looking for the right place to have U.S. LBO exposure."

Prophet raised its fund without a placement agent. Gatlin said some of the limited partner relationships were carryovers from his previous stints with Insight Equity Holdings LLC and Carlyle Management Group, the turnaround division of Carlyle Group. Other limited partners include Parish Capital Advisors LLP, Guardian Life Insurance and 747 Capital LLC, along with high net worth individuals and family offices. The fund has a standard "two and 20" fee structure.

Prophet's 14 investment professionals are looking to put $10 million to $50 million of equity to work over the life of a platform deal. The firm is targeting acquisitions in the value-added commodity, commodity-related, industrial services, mature technology, consumer products, auto, health-care and transportation spaces.

The fund has deployed 10% of its equity to date and could commit another 10% to 20% in deals that are either agreed to or in exclusivity.

The Southlake, Texas, firm already has acquired Altec Lansing, a maker of computer speakers, for about $16.2 million; formed Public Safety Supply Resources; and agreed to a $201.3 million deal with Silicon Storage Technology Inc. That last deal is the focus of a bidding war that includes Cerberus Capital Management LP.

Gatlin founded Prophet in 2007.

Reach Prophet at 817-898-1500.

Featured in LBO Wire February 1, 2010.

Edited by webmaster

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