New Hedge Fund To Focus On Banking Sector M&A

Nov 30 2011 | 3:51pm ET

Mendon Capital founder Anton Schutz is joining forces with investment banker Mark Cohen and former People’s United Financial CEO Philip Sherringham to launch a hedge fund focused on banking industry M&A activity.

The three hope to raise $500 million for the New Ground Capital fund which will hold anywhere from 25 to 50 companies in its portfolio. The founders say limited leverage should be necessary, given the current depressed valuations of bank stocks.

"This is just a wonderful ground floor opportunity to be buying right," Cohen told SNL Financial. "If you buy right, you're going to have a pretty good result in the end. We feel very confident that certainly we're not going to lose money and we have an opportunity to hit lots of singles and doubles and there will be a number of home runs."

The idea for the new fund began with Cohen, who has over 30 years’ experience advising banks and thrifts, most recently in his role as managing director at Stifel Nicolaus & Co. He reached out to Sherringham, who was president and CEO of People’s from 2007 until 2010, but the two decided they needed a recognized figure on the buy side. That’s where Schutz, who founded Mendon Capital Advisors—a long/short and event driven fund focused on the financial services sector—in 1996, came in.

The founders say New Ground intends to identify “attractive takeout targets” that will sell in the next one to five years. The team believes a period of rapid consolidation lies ahead in the banking sector:

"I know we've all been waiting for it to start and certainly the three of us agree, it's not a matter of if it will start, it's a matter of when it will start. I think the 'me too' process is going to pick it up very, very quickly," Schutz told SNL. "Once you get the 'me too' phenomenon, I think you'll see M&A prices rising."

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