American Capital launches $1.1 billion US lower middle market private equity fund

American Capital, Ltd announced today that it has entered into definitive agreements with a group of investors to establish American Capital Equity III, LP ("ACE III"), a new private equity fund focused on investing in companies in the lower middle market.

The transaction further expands American Capital's asset management business and diversifies its investor base, adding new private equity limited partners and increasing American Capital's earning assets under management by $0.9 billion or 7%. The investor group, which was led by funds advised by Coller Capital, Goldman Sachs Asset Management and StepStone Group, also includes select sovereign wealth funds, state retirement and pension systems, high net worth family offices, superannuation funds and foundations.

Prior to the closing, American Capital will contribute all of its equity and equity-related investments in seven portfolio companies and an option to acquire American Capital's equity investment in an additional portfolio company to ACE III. The aggregate agreed upon value of these investments, assuming the option is exercised, is approximately $640 million, subject to adjustments. The investor group, along with American Capital, also will provide an aggregate $445 million capital commitment generally to fund the purchase of new control equity and equity-related investments in companies with $5 to $25 million of EBITDA.