Source: MergerMarket, by Marlene Star
The Granite Creek Flexcap III fund closed oversubscribed at $300 million in November 2023. One of its investments is Ritchie Industries, a manufacturer of automated livestock watering products based in Conrad, Iowa. The fund is now nearing full deployment.
“We are approaching two-thirds of capital deployed,” said Jim Clark. Granite Creek has not started raising its next SBIC (small business investment company) fund.
As an SBIC fund, Granite Creek’s central thesis is to support “HR and employees in Iowa – invest in existing people, facilities, and products,” he said. Ritchie is a more than 100-year-old business, “and they wanted to set it up for the next 100 years,” he said.
When Granite Creek acquired the more than 100-year-old business early this year, it did something it doesn’t ordinarily do: team up with another investment firm. Granite Creek partnered with Rural American Fund, which is the second-largest shareholder in the company.
Both firms also provided debt, according to Clark. There was a rollover investment from management and employees of Ritchie, which was employee-owned. The deal took about five months to close because it had to be approved by the company’s ESOP trustee, he said.
“Generally, we do a deal on our own. Maybe 20% of the time we bring in a partner,” said
A partnership strategy usually happens for two reasons: the deal requires additional capital now or in the future to expand the business or make add-on acquisitions, or Granite Creek wants to partner with firms with relevant market expertise. In the case of Ritchie, Rural American was a good fit because it focuses on agribusiness, “with a relevant network and track record of investing in businesses around the farm.”
The sponsor believes it prevailed in the company’s auction process, led by Prairie Capital, because of Granite Creek’s expertise in agribusiness and focus on the upper Midwest and rural communities, said Clark.
“Most of our investments have secured debt with a current yield and minority or majority equity,” he said. Granite Creek was founded in 2005 and will celebrate its 20th anniversary this year, he said.