Baton Rouge-based Bernhard Capital Partners, a prominent private equity firm, is demonstrating remarkable growth and strategic acumen, particularly in the infrastructure services and regulated utilities sectors. Recent activities highlight its robust operational model and ambitious expansion plans, even as many other private equity entities face challenges in the current economic landscape.
In a significant move on Monday, Bernhard Capital Partners successfully completed a $1 billion acquisition of Bowman Consulting Group, a Virginia-based engineering and consulting firm. Bowman Consulting Group is renowned for its extensive work with global utilities, governmental bodies, and large industrial clients. Just two days later, the firm finalized another substantial acquisition: New Mexico Gas Co., for $1.25 billion. This latest purchase elevates Bernhard Capital’s portfolio of regulated utilities to five, with an additional, even larger acquisition of CLECO for nearly $6 billion, in partnership with Stonepeak, still pending.
Looking ahead, September is slated for the launch of Bernhard Capital’s fourth infrastructure services fund, with an ambitious target of $1.5 billion. This capital is earmarked for further investments and acquisitions in companies specializing in the design, construction, and maintenance of critical infrastructure, including utilities and industrial facilities. These recent developments underscore a period of intense activity for Bernhard Capital, solidifying its position as the largest private equity firm between Houston and Atlanta. The firm currently manages approximately $6.5 billion in assets and oversees 22 active portfolio companies, collectively employing around 28,000 individuals across the United States, with 3,500 based in Louisiana.
This impressive trajectory stands in stark contrast to the broader private equity landscape, where many firms are grappling with difficulties in executing deals and delivering attractive returns to their institutional investors. Reports indicate that as of June 30, private equity firms collectively held over 33,500 unsold companies, a figure double that of a decade prior. Despite this challenging environment, Bernhard Capital has managed to not only acquire new assets but also successfully divest existing ones.
Earlier this year, the firm divested Gray Casualty and Surety, United Utility Services, and the parent company of Epic Piping, one of its foundational portfolio companies. These successful exits signify a major milestone for Bernhard Capital, as they represent the complete divestment of all companies initially funded by its first infrastructure services fund, launched in 2014, which raised $750 million. Jeff Jenkins, managing partner at Bernhard Capital and co-founder alongside the late Jim Bernhard, expressed immense satisfaction, stating that successfully exiting all companies from their first fund and achieving targeted returns for their investors is a significant accomplishment.
The firm’s strategic focus, established nearly 13 years ago by Bernhard and Jenkins, has been a key driver of its success. They anticipated a "re-industrial revolution" in the Gulf Coast, fueled by abundant and affordable natural gas, leading to a boom in industrial construction. Leveraging Bernhard’s extensive experience, particularly from his time growing The Shaw Group into a publicly traded energy and industrial services powerhouse before its $3 billion sale to CB&I, the co-founders identified a lucrative opportunity in infrastructure and industrial services.
Since then, the country, particularly the Gulf Coast, has seen tens of billions invested in the construction of new liquefied natural gas export terminals, petrochemical facilities, and advanced artificial intelligence data centers. This surge in industrial activity has created a parallel demand for enhanced power generation, including new power plants, recommissioned nuclear facilities, and the emergence of innovative technologies like small modular reactors for industrial sites. Bernhard Capital’s portfolio companies are actively engaged in all these burgeoning sectors.
Gay Le Breton, managing director at Chaffe and Associates, an investment banking firm, commended Bernhard Capital’s foresight. She noted that while many private equity firms are now showing interest in these areas, Bernhard Capital established its focus on infrastructure and services early on, demonstrating a deep understanding derived from their operational backgrounds in energy and other industries.
Bernhard Capital has consistently outperformed, successfully closing its first three infrastructure services funds, raising $750 million, $1.2 billion, and $1.42 billion, respectively. The upcoming fourth fund, with its $1.5 billion target, aims to capitalize on the rapidly increasing power demand across the U.S. While firm officials have refrained from commenting on the report from Pitchbook, the trajectory suggests continued expansion. Additionally, the firm manages two dedicated infrastructure utility funds for its regulated utility investments, with a $530 million fund closed in 2020 and a second fund targeting $2 billion expected to close early next year. Jenkins expressed optimism regarding future growth, citing substantial opportunities within this "re-industrial revolution."
The recent acquisitions further illustrate this strategy. The Bowman deal brings a formidable engineering services and consulting firm with 2,500 global employees into the fold, serving regulated utilities, governments, and major data center developers. Notably, Gary Bowman, the founder, will retain an executive leadership role, a common practice for Bernhard Capital in integrating acquired companies and leveraging founder expertise.
The acquisition of New Mexico Gas, though contested by environmental activists and some state officials over concerns about potential rate hikes and regulatory oversight due to a "complex web" of holding companies, ultimately received approval. Bernhard Capital successfully addressed these concerns by committing to maintaining the utility’s corporate headquarters in New Mexico, providing capital for infrastructure upgrades, and agreeing to a rate freeze until 2028. This company is the state’s largest natural gas distribution provider, serving over 530,000 customers through more than 12,000 miles of pipelines. Jenkins expressed enthusiasm for the opportunities in New Mexico, highlighting the firm’s interest in investing in states and utilities that promise significant growth.
