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February 22, 2008

Private Equity Aims to Fill in the Funding Gap

As banks and conventional sources of money get harder to come by for businesses, a new private equity fund is aiming to fill that gap.

In Southlake, a former Bain & Co. employee has joined forces with additional team members to raise $250 million for a new firm, Prophet Equity, that will buy underperforming companies in the lower-middle market.

Ross Gatlin, Prophet's managing partner and CEO, probably doesn't need to work anymore. But driving the launch of Prophet Equity is his passion for lower-middle-market companies. He defines those as having revenue of between $20 million and $500 million, along with enterprise values below $250 million.

Gatlin says they have access to more than $100 million in capital they can invest now, even though their fund is targeted at closing toward the end of the year, according to Gatlin.

"We're working on deals right now," he says. "We don't have to wait for our fund (in order) to close five or 10 transactions."

Prophet executives plan to co-invest their own money in deals -- a big reason why Gatlin helped the firm get started in the first place.

According to Gatlin, Prophet executives have collectively invested more than $250 million of other people's money into businesses that have generated more than $1.6 billion in value in deals unassociated with the new equity fund.

Gatlin most recently was founding partner, chief restructuring officer and managing director at Insight Equity, another Southlake private-equity shop that focuses on turning around distressed businesses. "This is the new platform for me to continue the strategy of investing and approach that I was part of proving out at Insight," he says.

For the Bain alum, Prophet Equity will likely get a look at interesting deals that cross Bain's radar screen but are too small for the $50 billion giant. | 214-706-7123, | 214-706-7122

Excerpt from article featured in the Dallas Business Journal Friday, February 22, 2008

Edited by webmaster

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