Iowa PE firm closes second fund on $113m

Midwest Growth Partners has closed its second fund on $113.5 million, according to the founding partner of the West Des Moines, Iowa-headquartered private equity firm.

The fund, Midwest Growth Partners II, was launched in November and closed after securing investments of at least $100,000 from 26 investors, according to a regulatory filing in December.

Founded in early 2014, MGP’s first fund closed on $41.1 million that year and was deployed through a strategy focused on equity and debt investments into companies with revenue of between $4 million and $100 million. In addition to food and ag, the firm looks to provide succession and growth-related capital to profitable companies in the Midwest’s business services, manufacturing and logistics sectors.

MGP founding partner John Mickelson told Agri Investor that given the firm’s location in Iowa and focus on the broader Midwest, effectively all of its companies provide a service or products into the food and ag industry.

The firm was founded to address what it saw as a shortage of institutional capital for mid-market companies in the rural Midwest.

“If a company was big enough, you would get the attention of the guys from New York and Chicago, but if the company was smaller than what their target was, there just wasn’t very many places for those companies to get succession capital or growth capital,” Mickelson explained.

Thus far, MGP’s investments have included Pittsburg, Kansas-headquartered precision machinery operation Van Becelaere Machine Works, coating and roof restoration services provider Inland Coatings of Adel, Iowa, and Market Fresh Produce, a produce distributor headquartered in Nixa, Missouri.

MGP does not invest directly in production agriculture, Mickelson said, and instead focuses on companies in the midstream of the agricultural value chain as well as select consumer-facing companies.

The firm will be targeting investments of between $3 million and $8 million going forward, according to Mickelson, who added that agricultural investments from Midwest Growth Partners II are likely to include transactions involving branded food, specialty ingredient processing and the manufacturing of harvesting equipment.

Mickelson – who, according to his LinkedIn profile, held banking positions with The Private Bank, First National Bank of Omaha and Goldman Sachs before founding MGP in 2014 – declined to address return expectations.

He did explain that while MGP’s first fund drew mostly on executives’ personal networks in fundraising, the second fund’s status as a Rural Business Investment Company has allowed the firm to solicit commitments from commercial banks and Farm Credit System participants. Although awareness about the RBIC program was initially quite low, Mickelson said that MGP was well-supported by the US Department of Agriculture throughout its application and interest in the program is growing among LPs.

In addition to returns, investors in RBICs like Midwest Growth Partners II, are in part motivated by a desire to support the existence of strong and vibrant employers in rural communities, according to Mickelson.

“We are thrilled that there is more institutional interest in food and ag, whether it be in the Midwest or elsewhere, because for generations, it was an asset class that was overlooked by institutional money people,” said Mickelson.