September 10, 2004

Castanea Partners Closes 2nd Buyout Fund at $270M
by Edward Mason

NEWTON — Private equity firm Castanea Partners said it has closed on a $207 million buyout that will concentrate on investing in publishing companies and specialty retailers.
The fund is the second by the Newton-based firm, which was founded in 2001 by Brian Knez and Robert Smith, former co-CEOs of Harcourt General and retailer Neiman Marcus.

“Part of our strategy is to bring operating experience to businesses where we feel we can add value by virtue of our experience,” Knez said.

Besides publishing and retail Castanea will invest in human resources, and business services providers and consumer product companies.

Knez and Smith expect the fund to invest between $10 million and $20 million in mature companies.

The Castanea fund is the latest in a steady trickle helping 2004 fund raising outpace 2003. As of the end of the second quarter, the most recent period for which data is available, 39 buyout funds raised $14.6 billion, according to Thomson Financial Venture Economics/National Venture Capital Association. At the same time last year 41 funds raised $8 billion.

Of those, a number have been raised by Boston-area buyout shops, including Monitor Clipper Partners, Bunker Hill Capital, TA Associates, and Watermill Ventures. Ltd.
The first Castanea fund was $75 million, raised entirely from within. The new fund is a way for Castanea to control its own destiny. The firm’s first fund was raised from partners and other private individuals. Castanea turned to institutions, such as Princeton University and Yale University, to help the firm’s growth.

“We didn’t have to raise the fund,” said Smith. “But it would help us build Castanea for the long run. If you build with your own capital alone, you couldn’t do that.”

Edward Mason can be reached at emason@bizjournals.com.

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