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Archives for February 2013

Seacoast Has Final Close of Third Mezzanine Fund

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Seacoast Capital has held a final close on its third mezzanine fund, Seacoast Capital Partners III, L.P. (“Seacoast III”), with over $150 million of capital commitments. Seacoast has already closed on two investments totaling approximately $15 million of invested capital for its new fund.

“We’re very much looking forward to deploying Seacoast III,” said Seacoast Partner Jeff Holland. “The landscape for mezzanine capital in the lower middle market remains very attractive, and we’re seeing a lot of interesting opportunities. While a number of other private equity firms have come and gone in the lower middle market over the years, we’ve chosen to stick to what we’ve been doing for over 20 years — providing mezzanine and equity capital to support the management teams of smaller businesses in a historically underserved segment of the market.”

In early December, Seacoast provided a combination of subordinated debt with warrants and convertible preferred stock to Fire Protection Service Corp. (dba Mountain Alarm) as part of a debt recapitalization. Mountain Alarm specializes in the design, installation, service and monitoring of security and fire alarm systems for the commercial and residential markets. The company has operations in Arizona, Colorado, Idaho, Utah and Washington. The company is based in Ogden, UT (www.mountainalarm.com).

In late December, Seacoast provided subordinated debt with warrants to FAPS to recapitalize existing debt and provide capital for growth. FAPS is a provider of automotive port processing services in the Port of New York and New Jersey. The company provides value-added import, export, domestic re-marshaling and rail processing services to major domestic and foreign automotive OEMs. With a processing capacity of over 400,000 vehicles annually, FAPS is one of the largest automotive port processors in the U.S. The company was founded in 1956 as “Foreign Auto Preparation Service, Inc.” (FAPS) and is based in Newark, NJ (www.fapsinc.com).

In addition to the final close of Fund III, Seacoast has added Patrick Gengoux as an Associate in the firm’s San Francisco office. He will be responsible for new deal evaluation, analysis, financial modeling, due diligence and structuring as well as portfolio company monitoring. Mr. Gengoux has prior experience at Pacific Capital Bank, where he was a generalist working with distressed and underperforming middle market companies and at Signature Capital Advisers, a special situations private equity fund. He has an MBA from the Anderson School of Management at UCLA and a BA in Economics and International Relations from Claremont McKenna College.

Seacoast makes non-controlling subordinated debt and equity investments in privately-held lower middle market companies that have at least $10 million in revenue and $2 million of EBITDA. Seacoast typically provides between $3 million and $12 million of debt and equity capital for acquisitions, growth, shareholder buyouts, management buyouts, and leveraged recapitalizations to provide shareholder liquidity. The firm is industry agnostic but has a specific interest in the specialty manufacturing, value-added distribution, and business services sectors. Seacoast was founded in 1994 and has offices in Boston and San Francisco (www.seacoastcapital.com).

© 2013 PEPD • Private Equity’s Leading News Magazine • 2-28-13

Kensington Global Private Equity Fund Announces Record Distribution

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Three years into a North American economic recovery of slow but steady GDP growth, most investors have not seen this improved economic performance translate into portfolio earnings. Yet despite the headwinds facing public markets, private equity continues to represent an alternative investment strategy that is delivering sustained investor returns.

This wealth creation has translated into strong performance for the Kensington Global Private Equity Fund, which today announced a record distribution of $2.13 per unit, representing a 9.8% payout. After this latest distribution, fund investors will have received a total of $3.69 per unit (16.9%) within the past 12 months. The new distribution exceeds the $1.56 per unit paid in October 2012, reflecting strong growth in the realized gains achieved within the Kensington private equity portfolio. The Kensington Global Private Equity Fund has generated annualized returns of 11% in the three years ending on December 31, 2012 — more than double the S&P/TSX Index’s annualized returns of 4.5% over the same period.

“When we sell an investment at a profit, our policy is to distribute those profits to our investors, while re-investing the original capital,” said Rick Nathan, Managing Director, Kensington Capital. “Today’s announcement represents the distribution of the realized profits that we have generated from the sale of portfolio companies through the past several months.”

The realities of today’s public markets, such as continued volatility driven by external events — from fiscal crises in Europe to political gridlock in Washington — combined with normal gyrations from quarterly earnings expectations and high frequency trading, have gradually separated the stock market index from the economic cycle. And as public markets finally edge back to pre-downturn levels, public market investors must face the discouraging fact that recent stock market gains — while encouraging — have merely returned market values to where they were five years ago.

“Over the past several years, traditional portfolios of stocks and bonds have largely failed in their core mission to create wealth, generate income, and secure long-term retirement savings, while the private equity market has been providing investors with a reliable avenue to participate in the steady economic growth that surrounds us,” said Mr. Nathan. “Private equity represents an investment in the real economy, where wealth creation is based on real measures such as earnings growth and profitability, and the abilities of private equity managers to translate these measures into tangible gains for investors.”

Canada’s largest institutional investors, which require steady long-term portfolio gains to fund their pension obligations, have also participated in the growth of private equity markets and are continuing to allocate more and more capital to the sector. In particular, the Canada Pension Plan Investment Board held 17.1% of its total assets in private equity investments as of December 31, 2012, while OMERS increased its private market investments (consisting of private equity, real estate and infrastructure) to 40% during the 2012 period. Globally, according to Preqin’s Investor Outlook, a strong majority (85%) of large international investors stated that their private equity portfolio returns met or exceeded expectations in 2012, and almost a third (27%) expect to increase their level of exposure to private equity in 2013.

Investment in private markets remains promising, with private equity activity continuing an upward trajectory. Canada’s Venture Capital & Private Equity Association (CVCA) and Thomson Reuters last week released a joint report showing that the 2012 private equity market saw the highest deal volume on record. According to the report, disclosed Canadian buyout and private equity disbursements totaled $11.6 billion in 2012, marking the highest level of dollars invested in the Canadian market since 2008. Private equity transactions totaled 313, up 4% from 2011 and establishing a new market record.

The Kensington Fund invests in a diversified portfolio of private companies and funds, typically holding each underlying company for a period of three to five years before selling to a larger corporation or into the public markets through an IPO. Kensington is best known for its private equity investment programs, having committed over $600 million since 2002, and is also an active investor in infrastructure assets and hedge funds. The firm was founded in 1996 and is based in Toronto (www.kcpl.ca).

© 2013 PEPD • Private Equity’s Leading News Magazine • 2-28-13

April Simile Joins Incline as Director of Business Development

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Incline Equity Partners has added April Simile to its team as Director of Business Development. Lauren McKibben, previously Director of Business Development, will transition to a new role as Investment Associate within the firm.

“We’re very excited about the addition of April Simile to the Incline team,” said Jack Glover, Partner of Incline Equity Partners. “April brings a wealth of strategic marketing and communications experience to the position and will play a key role in the continued growth and success of our firm.”

Ms. Simile will focus on deal origination; expanding Incline’s business with existing deal sources and developing new relationships with lower middle-market business owners and advisors.  Ms. Simile previously worked as a Senior Vice President at Allegheny Valley Bank, a Pittsburgh-based commercial financial institution. She held executive positions in the areas of commercial lending, corporate cash management, retail delivery, and marketing during her 12 year tenure. Ms. Simile received her BS in Finance from La Roche College.

Ms. McKibben, who has held the position of Director of Business Development since May 2009, will move to Investment Associate effective April 1, 2013. She will be responsible for evaluating and analyzing investments made by the firm.

Incline Equity Partners invests from $10 million to $25 million in support of leveraged buyouts, recapitalizations, and large minority financings of lower middle market growth companies with enterprise values between $25 million and $100 million across a variety of industry sectors including specialized light manufacturing, value-added distribution, and business and industrial services. The firm was formed in 2011 by three managing principals of PNC Equity Partners: Jack Glover, Wali Bacdayan, and Justin Bertram. Incline Equity Partners is based in Pittsburgh (www.inclineequity.com).

© 2013 PEPD • Private Equity’s Leading News Magazine • 2-28-13

Wayne Wu Promoted to Principal at VMG

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VMG Partners, an investor in consumer product companies in the lower middle market, has promoted Wayne Wu to Principal. “As we continue to grow and build our firm we are pleased to strengthen the management team by promoting from within our existing group of talented professionals,” said Michael Mauzé, a Managing Director of VMG.

Mr. Wu joined VMG in 2008 as an Associate with experience in transactions, operations, and accounting. Since then, he has worked on transactions across the firm’s investment focus, including in the food, beverage, pet and household products, lifestyle, and personal care sectors. He was promoted to Vice President in 2010. As is typical for senior members of the firm, he is involved in originating new investment opportunities, due diligence on new business opportunities, structuring transactions, and working with partner companies. Prior to joining VMG, he was CFO and Vice President of Corporate Development for Thomason Autogroup. He also was an investment banker with RBC Capital Markets, and he began his career as an associate at Deloitte & Touche. Mr. Wu currently serves on the Board of Directors of Mighty Leaf Tea, Speck Products, and BabyGanics. He received his B.S.C. from the Leavey School of Business at Santa Clara University and is a licensed CPA in the State of California.

“Since Wayne joined the firm he has been closely involved with a breadth of transactions across industries and played a leading role in our most recent investment in BabyGanics,” said Mr. Mauzé. “He has worked closely with the management teams of our portfolio companies to build stronger and more enduring businesses and also served as a mentor to his colleagues. We are pleased with his progress within our organization and recognize his contributions with this promotion.”

VMG Partners invests in branded consumer products companies in the lower middle market. Targeted industries include food, beverage, wellness, pet and household products, personal care and lifestyle brands. The firm is has offices in San Francisco and Los Angeles, CA (www.vmgpartners.com).

© 2013 PEPD • Private Equity’s Leading News Magazine • 2-28-13

SunTx Capital Partners Exits Huron

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SunTx Capital Partners has sold its portfolio company, Huron, a supplier of tubular assemblies and other machined products for the automotive industry. SunTx Capital Partners invested in Huron in 2005.

“Huron is clearly an industry survivor and is well-positioned to continue growing the business. We sincerely thank Ned Fleming and the SunTx team for their support, particularly during the automotive industry’s most challenging economic times. SunTx has been an excellent partner; they encouraged us to think broadly and creatively and helped us strategically position the company. Their input complemented our operational acumen,” said Bob Bales, President of Huron.

Huron is a supplier of value-added tubular assemblies and precision components used in automotive engine, transmission, fuel and climate control systems. Customers of Huron include some of the world’s largest car manufacturers, as well as key automotive OEM and Tier I suppliers. Huron was founded in 1943 and is based in Lexington, MI (www.huroninc.com).

“The sale of Huron is a validation of our firm’s investment strategy of seeing value in mid-sized operating companies where others do not and patiently working with management to build a better company for its stakeholders, while creating value for our investors. SunTx has enjoyed supporting Huron’s successful transition from a supplier of commodity components to a supplier of strategic products to many of the auto industry’s biggest names. We have been an investor in Huron since 2005 and we wish the company continued success,” said Ned Fleming, Founder and Managing Partner of SunTx.

SunTx Capital Partners invests in middle-market manufacturing, distribution and service companies. The firm was founded in 2001 and currently has over $600 million of assets under management. SunTx is headquartered in Dallas (www.suntx.com).

Donnelly Penman & Partners (www.donnellypenman.com) served as financial advisor and Haynes and Boone served as legal counsel to SunTx for this transaction.

© 2013 PEPD • Private Equity’s Leading News Magazine • 2-28-13

Paine & Partners Acquires Northwest Agricultural Products

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Verdesian Life Sciences, a portfolio company of Paine & Partners, has acquired Northwest Agricultural Products, a provider of specialty agricultural products.

Northwest Agricultural Products (NAP) is a provider of specialty agricultural products used to enhance plant health and optimized crop yields. The company’s technical strengths include plant pathology and physiology, advanced fermentation, bioprocess development and chemical, biochemical and environmental engineering. NAP was founded in 1989 by David Bergevin and is headquartered in Pasco, WA (www.nap-chem.com).

“We are excited to team up with Verdesian – a strong platform that offers the experience and resources necessary to help a highly specialized company like NAP to grow and develop. We are confident that NAP can use the Verdesian platform to expand its business and energize its sales and marketing capabilities so that its products can enhance plant health and nutrition in markets where they are needed most,” said Mr. Bergevin.

Verdesian Life Sciences is a platform company formed by Paine & Partners to invest in the plant health and nutrition sectors. The company was formed in September 2012 simultaneous with the completion of its first acquisition, Biagro Western Sales. Biagro focuses on technologies used to develop plant health and plant nutrition products in agricultural markets globally. Verdesian is headquartered in Cary, NC (www.vlsci.com).

“We are excited about our transaction with NAP, which is an important next step in Verdesian’s growth strategy. The acquisition of NAP underscores Verdesian’s strategic focus on plant technologies that enhance the uptake of key nutrients using multiple modes of action as well as aligning plant health nutritional technologies with agronomic practices,” said J.J. Grow, Chief Executive Officer of Verdesian Life Sciences. “NAP’s differentiated products – its bioscience lines, in particular – are highly complementary to Biagro Western’s. NAP has built a strong position in its markets, and Verdesian will leverage its international platform to expand NAP’s customer base to take it to a new level of growth. We look forward to working with NAP’s employees and we welcome them to the Verdesian family.”

Paine & Partners provides equity capital for management buyouts, going private transactions, and company expansion and growth programs. The firm, with $1.2 billion of capital under management, has offices in San Mateo, CA; New York, NY and Chicago, IL (www.painepartners.com).

© 2013 PEPD • Private Equity’s Leading News Magazine • 2-27-13

Nautic Partners Exits Big Train

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Nautic Partners has completed the sale of Big Train, a manufacturer and marketer of liquid and powdered beverage concentrates, to Kerry Group.

“Our partnership with Nautic was a tremendously positive experience,” said Robyn Hawkins, former Chief Executive Officer of Big Train. “With Nautic we expanded our relationships with multiple key customers, acquired substantial new business, and positioned the company for strong growth in the coming years.”

Big Train is a manufacturer and marketer of liquid and powdered beverage concentrates used for blended ice coffee, fruit smoothies, chai tea, cocoa drinks and various syrups. The company distributes its products through multiple channels, including independent coffeehouses, large retail chains, and international distributors. Coffeehouses sell the company’s product under the “Big Train” brand as well as under private label. The company is headquartered in Lake Forest, CA (www.bigtrain.com).

“Our experience working alongside the Big Train management team has been excellent,” said Bernie Buonanno, Managing Director of Nautic. “The strength of the company’s leadership and the high quality of its products are reflected in its double-digit growth over the last few years.”

Nautic Partners is a middle-market private equity firm with over $2.5 billion of equity capital under management. Nautic targets majority equity investments of $25 million to $75 million. Sectors of interest include business services, manufacturing, and healthcare. Nautic is currently investing its most recent fund, Nautic Partners VI, a $780 million fund which closed in June 2008. The firm was founded in 1986 and is located in Providence, RI (www.nautic.com).

The Big Train sale was Nautic’s fourth liquidity event since November 2012. The three other exits were GCA Services Group to The Blackstone Group, Aavid Thermalloy to Audax Private Equity, and Agilex Fragrances to MidOcean Partners.

Kerry Group is a food ingredients and flavoring company serving the food and beverage industry. The company supplies over 15,000 food, food ingredients and flavor products to customers in more than 140 countries worldwide. Kerry Group employs over 24,000 people throughout its facilities in Europe, North America, South America, Australia, New Zealand and Asia. Current annualized sales of the company are approximately €5.8 billion. Kerry Group is headquartered in Tralee, Ireland (www.kerrygroup.com).

© 2013 PEPD • Private Equity’s Leading News Magazine • 2-27-13

Serent Capital Invests in the Knowland Group

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Serent Capital has made an investment in the Knowland Group, a data and software provider to the hospitality industry.

Knowland’s cloud-based sales and catering services and its competitive intelligence tools help hotels maximize revenue from meeting and conference space. The company serves more than 3,000 hotel customers and 25,000 users globally. Knowland was ranked as the 76th fastest growing company (public or private) in North America by Deloitte in 2011 and the second fastest growing company in the travel industry for both 2009 and 2010 by Inc. Magazine. The company was founded by Michael McKean in 2004 and is headquartered in Washington DC (www.knowlandgroup.com).

“I wanted to be as thoughtful as possible as to the next steps for the business,” said Mr. McKean. “Over the last few years, we met a great number of potential partners. At the end of the day, Serent stood out for a number of reasons. Among other things, Serent strong reputation and experience in the hospitality and technology market was compelling. In addition, Serent’s business-building strategy resonated, particularly given the success they have achieved across other firms in their portfolio.”

Leveraging its principals’ experience investing in the hospitality market, Serent spent considerable time evaluating emerging companies in the hospitality technology sector. “Knowland established itself as a leader in the hospitality technology market by helping hotels maximize revenue from their meeting and conference space by leveraging Knowland’s unique data and technology. Our team is excited about the opportunity to work with Knowland and the great executive team Mike has put together,” said Kevin Frick, co-founder and General Partner of Serent Capital. “Knowland is revolutionizing the group segment of the hospitality industry, and we look forward to working with the team to further that goal.”

Serent Capital has over $600 million in capital under management from a mix of endowments, pension funds, fund-of-funds, and family offices. The firm invests from $10 million to $100 million in service businesses with revenues from $10 million to $100 million and EBITDAs from $3 million to $10 million. Transaction types include buyouts, recapitalizations and growth capital. Serent Capital is based in San Francisco (www.serentcapital.com).

© 2013 PEPD • Private Equity’s Leading News Magazine • 2-27-13

CVC Capital and Standard Chartered Exit Infastech

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Stanley Black & Decker has completed its acquisition of Infastech, a manufacturer and distributor of specialty engineered fastening technologies, from CVC Capital Partners and Standard Chartered Private Equity Limited for $850 million in cash.

Infastech designs, manufactures and distributes highly‐engineered fastening technologies and applications for a blue-chip customer base in the industrial, electronics, automotive, construction and aerospace end markets. The company is based in Hong Kong and has revenues of approximately $580 million and more than 2,000 employees (www.infastech.com).

Stanley Black & Decker, an S&P 500 company, is a diversified global provider of hand tools, power tools and related accessories, mechanical access solutions and electronic security solutions, engineered fastening systems, infrastructure solutions and more. The company is headquartered in New Britain, CT (www.stanleyblackanddecker.com).

CVC invests in industrial and service businesses. To date, CVC has raised over $44 billion in capital completing over 290 investments in a range of industries and countries across the globe, with an aggregate transaction value of $169 billion. In total, the firm manages over $37 billion and is investing from CVC Tandem Fund, CVC Fund V and CVC Asia III. The firm is based in London and has a network of 19 offices and 230 employees throughout Europe, Asia and the United States (www.cvc.com).

Standard Chartered Private Equity Limited has invested over $5 billion to date in mid- to late-stage companies across a range of industries that require equity funding for expansion or to finance changes of ownership, such as acquisitions or management buy-outs. The business is part of Standard Chartered PLC, a British multinational banking and financial services company headquartered in London (www.standardchartered.com).

© 2013 PEPD • Private Equity’s Leading News Magazine • 2-27-13

Abacus Backs Latest One Rock Acquisition

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Abacus Finance Group, a provider of cash-flow financing for private equity-sponsored, lower-middle market companies, served as Administrative Agent and Sole Lead Arranger for $16.5 million in senior secured credit facilities to support the divisional spin out of Kova International from Hycor Biomedical. Kova International was acquired by an investor group consisting of One Rock Capital Partners, Laurel Crown Partners, StoneCreek Capital and management.

“We chose to partner with Abacus for this investment because of their expertise in financing healthcare companies and their ability to assure a certainty of close early on,” said One Rock Partner Kimberly Reed. “Abacus was highly recommended to us. They were easy to work with and flexible in structuring the transaction, which gives us the foundation to pursue our growth strategy.”

Abacus targets debt financing opportunities of up to $50 million with a typical hold size ranging from $10 million to $25 million, and the companies it finances generally have an EBITDA between $3 million and $15 million. Abacus was formed in June 2011 and is an affiliate of New York Private Bank & Trust, the holding company for Emigrant Bank, founded in 1850, the largest privately held bank in America with approximately $10 billion in assets. Abacus is based in New York (www.abacusfinance.com).

“One Rock, a new relationship for us, is a great fit for our firm given their investment strategy and their sector focus,” said Tim Clifford, President and CEO of Abacus. “They were terrific to work with, and we were impressed by the thoroughness of their due diligence. As in other transactions, the critical success factors came down to our flexibility and our ability to provide certainty of close – both important aspects of what we call our Total Partnership Approach.”

Other Abacus team members involved in the transaction included Senior Vice President Mindy Naylor and Associate Song Pettus.

The acquired urinalysis business will be named Kova International and will continue to operate out of its Garden Grove, CA manufacturing facility. The transaction includes the transfer of urinalysis assets and employees. Kova International will be led by Vance Mitchell, who has more than 25 years of experience with the Kova urinalysis business (no website is available yet for Kova International).

HYCOR Biomedical is a manufacturer and marketer of in vitro diagnostics products. Since its founding, HYCOR has expanded its presence in allergy and autoimmune products used in clinical laboratories, hospitals and doctors’ offices worldwide. Brand names include HYTEC™ and AUTOSTAT™. HYCOR was founded in 1981 and is based in Garden Grove, CA (www.hycorbiomedical.com).

One Rock makes equity investments of $10 million to $50 million in companies operating in the chemicals, industrial and consumer durables, business services, environmental services, healthcare products, and automotive retail sectors. The firm is based in New York (www.onerockcapital.com).

© 2013 PEPD • Private Equity’s Leading News Magazine • 2-27-13

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