CapitalSpring, the Nashville-based private investment firm, said Monday it had closed its sixth investment round, including $950 million in capital commitments.
The fund exceeded its target of $200 million and included commitments from new and existing partners, including public and private pension plans, endowments, foundations and family offices.
CapitalSpring traditionally invests exclusively in restaurants, using either equity or debt investments, and focuses on franchisors, franchisees or company-operated chains, generally in the limited service category. This fund will target investments ranging from $10 million to $150 million.
Erik Hermann, partner and head of the investment group at CapitalSpring, said the firm could also expand its investments to include “the ecosystem around the multi-unit restaurant business,” meaning it could target manufacturers, technology companies and business departments that deal with restaurants. .
“We want to look to grow in a way that leverages our historical experience and examines businesses that sell to restaurants in one way or another,” Hermann said. “It’s the next logical step.”
The company was launched 17 years ago and has raised over $2.5 billion across more than 75 different restaurant brands.
He launched his last fund at the start of the pandemic, in 2020. “We had a hard time getting people excited about restaurants, at least initially,” Hermann said.
Once the industry got through this initial period, however, and some of its strengths began to emerge, particularly in takeout, investments in the fund improved.
Hermann believes the industry has gone through a “material crisis,” with a number of shutdowns that could allow certain segments to gain market share. As things stand, CapitalSpring companies have generally outperformed the market, he said. “We are very excited about the next few years,” Hermann said.
CapitalSpring targets companies with proven management teams and says it has a variety of programs its companies can draw on, such as procurement.
Hermann said the company will be more flexible in coming years, in part due to ongoing industry changes, including some of the margin pressures the industry faces. But that in itself could be an opportunity for a company that often comes to help companies reset their funding, which CapitalSpring can help with.
“Generally the good news is that demand is strong, with a caveat on cost,” Hermann said. Some of those costs might sound “pretty ugly,” he said.
“It wouldn’t surprise us if we saw more defaults with conventional lenders,” Hermann said. “That could be a deal catalyst where companies need a capital structure reset.”
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