Pritzker Group to Step Up Midmarket Investing

February 24, 2012

Taina Rosa | The Deal Pipeline

The Pritzker Group, the investment arm of Chicago’s wealthy Pritzker family, is poised to expand its middle-market private equity activity, poaching Paul Carbone, an 18-year veteran of Baird Private Equity, part of Chicago advisory firm Robert W. Baird & Co.

Carbone, who joins officially on March 5, will lead the private equity team as a managing partner assisting in shaping its strategic direction.

The Pritzker Group, led by Anthony “Tony” Pritzker and younger brother J.B. Pritzker, seeks to have a larger presence in its core middle market, with plans of boosting talent and more than doubling the firm’s portfolio holdings. J.B. Pritzker declined to disclose how much the group’s total assets under management are worth. The brothers are sons of Donald Pritzker, who embarked on the group’s hotel business. According to reports at the time, the two started off with $300 million to invest in companies about a decade ago.

Their investment house holds majority positions or full ownership in six companies and minority positions in two others, but the goal is to build up the portfolio and have up to 15 companies “in the next few years,” J.B. Pritzker said.

Carbone, 50, hadn’t planned on joining the firm at the outset. The executive was not intending to leave his buyout firm and had, in fact, suggested other candidates to Pritzker.

But after a nine-month-long search, J.B. Pritzker said, “we found that the best person was working only two blocks away.”

At any rate, Carbone, who holds an M.B.A. from Harvard Business School, should find a good fit in the Pritzker Group, which invests in companies valued at between $50 million and $400 million.

The Pritzkers “offered a compelling opportunity to expand the family’s tradition of building long-term value for companies through acquisitions,” Carbone said.

During his time at Baird, Carbone helped build the business from $23 million in assets in early 1994 to $2.8 billion today, through four investment funds. During that period, Baird’s active portfolio increased from six companies in 1999 to 55 companies with combined revenue of more than $2 billion in 2011.

At the Pritzker Group Carbone will work with the family’s proprietary capital. “We will be deploying money from the Pritzker family interest, so there are no third-party investors in the equation,” he said. “This will allow me to focus on investing in companies, evaluating them and growing them for the long term. Pools with a set time frame can’t do that.”

The Pritzkers’ definition of patient capital may differ from most buyout shops.

“We can hold a company for the typical period like other private equity firms or we could own it for a lifetime,” J.B. Pritzker explained. “Our focus is on the nitty-gritty of building a company organically to obtain returns.”

He said the firm shoots for a return on invested capital of around 20%.

In its latest acquisition, the Pritzker Group acquired Entertainment Cruises Inc., a Chicago sightseeing and dining cruise company with operations in seven U.S. cities, for $161.6 million.

Last week, the Pritzker family business sold its co-investment in credit reporting company TransUnion Corp. in a secondary buyout valued at more than $3.2 billion. That exit provided an internal rate of return in the mid-50% range to investors led by Chicago buyout firm Madison Dearborn Partners LLC.


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