Apis & Heritage Capital Partners has exceeded its $250 million target for its second employee-led buyout fund. The private-credit Apis & Heritage Legacy Fund, aimed at putting business equity in workers’ hands, has been backed largely by impact investors, including high-net-worth individuals, foundations and family offices.
“We’re super excited about the close, which I think speaks to the demand around employee ownership from investors,” said Tobi Adewodu of Apis & Heritage, which is coaxing hesitant limited partners to help push the fund to its $350 million hard cap. “We’re seeing our LP base continue to diversify. We want to see pension funds. We want to see university endowments get behind this.”
Apis & Heritage’s pitch to LPs is that workers, not private equity investors, should own the tens of millions of small and mid-sized businesses that are expected to change hands in coming decades. (see, “Employee ownership funds seek to give private equity investors a run for their money as businesses change hands”).
Other employee-ownership investors are advancing a similar thesis. Liquidus Partners is raising a $300 million fund to acquire seller notes from ESOP transactions, while Monarch Investment Partners is targeting up to $250 million to provide seller financing for employee-led buyouts (see, “Employee ownership funds seek to give private equity investors a run for their money as businesses change hands”).
Easy yes
“The folk that have built these businesses want the opportunity to see their workers benefit in what they’ve built. That’s what Apis & Heritage is tapping into,” said Stephen Vicinelli of Social Finance, which committed $3 million through its Impact First Fund.
“We really, really value the focus that Apis & Heritage brings to wealth building,” Vicinelli told ImpactAlpha. “We met [the team] back in 2022. We’ve stayed close and we really like their approach to impact.”
Gary Community Ventures, a hybrid family office and private foundation in Denver, is among investors that reupped in the new fund.
“Instead of concentrating wealth and power for private equity firms overseeing increased efficiency and returns from companies, they’re pointing those returns back to the employees themselves and creating a mechanism for them to share in that value,” said Gary Community’s Catherine Toner. “Fund two was an easy yes.”
Larger buyouts
Through its first $58.1 million employee-led buyout fund, Apis & Heritage has financed the ownership transition of six businesses to thousands of low- and moderate-income workers. The Washington, DC-based firm offers mezzanine debt capital to help workers form S-Corp ESOPs, 100% employee-owned companies that benefit from federal and state tax exemptions.
In January, Apis & Heritage completed its largest buyout and the final of its first fund, financing the employee-led purchase of B and B Maintenance, a cleaning company for government, education, healthcare and other commercial facilities in the US.
With $250 million, the second fund aims to create 3,000 business worker-owners over five years. A successful hard close later this year could add even more workers to the employee ownership portfolio.
The fund will target companies with annual earnings before interest, taxes, depreciation and amortization, or EBITDA, of $3 million to $10 million.
Larger businesses “typically have more sophisticated finance and HR infrastructures, which enable smoother transitions to employee ownership and help unlock greater value through the ESOP structure,” told ImpactAlpha last year.
