February 5, 2013
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Archives for February 5, 2013

TCF Capital Funding Backs Spell Recap

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TCF Capital Funding has provided $10.5 million in senior secured credit facilities in support of the recapitalization of East Coast Colorants (dba Breen Color Concentrates), a portfolio company of Spell Capital Partners.

TCF Capital Funding provides asset-based loans and private equity sponsor-backed cash flow loans to companies with less than $100 million in revenue and between $2 million and $10 million in EBITDA.  The firm is led by Joseph Gaffigan, President, and is based in Burr Ridge, IL (www.tcfcapitalfunding.com).

Breen Color Concentrates is a manufacturer of custom and stock color concentrates for the plastics industry.  In addition to custom formulations, Breen’s range of products includes products using additives and agents to achieve specific physical, chemical, or aesthetic properties.  The company supplies its color concentrates to a number of end markets, and is the market leader in the wire & cable segment.  Breen Color Concentrates is based in Lambertville, NJ (www.breencolor.com).

“We are excited to enter into this relationship with Spell and with the management team at Breen.  We look forward to working closely with both Breen and Spell,” said Edward Ryczek, Senior Vice President of TCF Capital Funding.

Spell Capital Partners makes control investments of $3 million to $15 Million in industrial manufacturing companies with revenues of at least $5 million and EBITDAs of at least $1.5 million.  Spell Capital Partners is based in Minneapolis (www.spellcapital.com).

© 2013 PEPD • Private Equity’s Leading News Magazine • 2-5-13

American Capital Books $300 Million in Sponsor Deals in 2012

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In 2012 American Capital invested over $300 million in 28 private equity sponsored transactions. These investments were led by American Capital’s offices in the United States and Europe and were made in support of buyouts, refinancings, add-on acquisitions, dividend recapitalizations and growth opportunities.

“In 2012, our Sponsor Finance Group was successful in sourcing and closing attractive new investment opportunities by working closely with some of the best private equity firms in the United States and Europe,” said Adam Spence, Managing Director, American Capital.  “We very much look forward to continuing to deepen and expand our sponsor relationships as we seek to aggressively put capital to work in 2013 and beyond.”

American Capital is a publicly traded private equity firm and global asset manager that originates, underwrites and manages investments of $10 million to $750 million in middle market private equity, leveraged finance, real estate and structured products. Founded in 1986, American Capital has $118 billion in total assets under management and has eight offices in the US, Europe and Asia. The firm is headquartered in Bethesda, MD (www.AmericanCapital.com).

“Our ability to provide flexible financing solutions of up to $150 million in senior, mezzanine, second lien, unitranche and equity co-investment, as well as our responsive execution with a global underwriting platform and commitment to growing portfolio companies make American Capital an ideal investment partner for sponsors, lenders and management teams,” said Bowen Diehl, Managing Director, American Capital.

A summary of selected 2012 transactions is outlined below:

Aderant Holdings: In December 2012, American Capital invested in first and second lien facilities to support a private equity firm in its purchase of Aderant Holdings, a global provider of comprehensive business management software for law and professional services firms.

AmWINs Group: In June 2012, American Capital invested in a second lien facility to support a private equity firm in its purchase of AmWINs Group, a wholesale insurance broker.

CAMP Systems International: In May 2012, American Capital invested in a second lien facility to support a private equity firm in its purchase of CAMP Systems International, a provider of subscription-based maintenance tracking information services to the corporate aviation market.  CAMP Systems International has been a portfolio company of American Capital since 2007 when American Capital invested in a second lien facility to support its recapitalization led by a private equity firm.

Consolidated Precision Products:  In December 2012, American Capital invested in a second lien facility to support a private equity firm in its purchase of Consolidated Precision Products, a global aerospace castings manufacturer for the commercial aerospace, military and industrial markets.

The Flexitallic Group: In July 2012, European Capital invested in unitranche bonds to support a private equity firm in the refinancing of The Flexitallic Group, formerly the FDS Group. In December 2012, European Capital invested in unitranche bonds to support The Flexitallic Group’s add-on acquisition of Custom Rubber Products, a manufacturer of elastomer, phenolics, and thermoset plastic products for upstream and midstream oilfield and industrial markets.  The Flexitallic Group is an international market leader in the manufacturing and distribution of high-end sealing solutions.

Sage Products: In December 2012, American Capital invested in a second lien facility to support a private equity firm in its purchase of Sage Products, a healthcare products manufacturer focused on infection prevention and patient safety products.

Tomkins Air Distribution:  In November 2012, American Capital invested in a second lien facility to support a private equity firm in its purchase of Tomkins Air Distribution, a provider of ventilation solutions to non-residential and residential buildings.

Transtar Holding Company:  In October 2012, American Capital invested in a second lien facility to support a private equity firm in the dividend recapitalization of Transtar Holding Company, a distributor of automotive aftermarket parts.

Unipex Group:  In September 2012, European Capital invested in unitranche bonds to support a private equity firm in its purchase of Unipex Group, a global distributor of natural active ingredients and specialty chemicals for the cosmetic, pharmaceutical, nutrition and industrial sectors.  Unipex Group has been a portfolio company of European Capital since 2008 when European Capital invested in a mezzanine facility then put in place to support the spin-off of Unipex Group from Atrium Innovations, led by a private equity firm.

© 2013 PEPD • Private Equity’s Leading News Magazine • 2-5-13

Private Equity Returns Inch Up

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Private equity funds in the U.S. returned to positive territory in the quarter ending September 30, 2012, following a slightly negative second quarter. U.S. venture capital funds, while significantly underperforming private equity, also turned in a positive performance for the third quarter. Performance of both classes of alternative assets lagged public market returns, which rebounded from a poor second quarter to generate robust third quarter results.

The Cambridge Associates U.S. Private Equity Index® returned 3.6% for the third quarter, a 3.7% increase over the prior period. The index stood at 9.2% year-to-date and was up more than 15% over the preceding 12 months. The Cambridge Associates U.S. Venture Capital Index® earned 0.6% in the third quarter, mirroring its result in the second quarter. The venture index’s year-to-date and one-year returns were 6.1% and 7.7%, respectively. The following table compares the performance of the private equity and venture capital benchmarks with that of some important public market indices.

U.S. Private Equity and Venture Capital Index Returns
for Periods ending September 30, 2012

(click image to enlarge)

The private equity index outperformed indices tracking large and small public companies in all six of the time horizons longer than one year listed in the table above, from the three-year to the 25-year mark. The venture capital index trailed the public markets in five of the nine periods in the table. Over the longer time horizons, the VC index, like the PE index, significantly outperformed the public markets.

At the end of the third quarter, public companies comprised 21.0% of the value of the PE index and 14.7% of the VC index. Both figures were down from the prior quarter.

The Largest Vintage Year in the PE Index Was Also the Best Performer Among the Top-Sized Vintages

Only five vintages in the PE index represented at least 5% of the benchmark’s value. All five had positive returns for the quarter. Funds launched in 2007 comprised the largest group in the index, representing more than one-fourth (25.8%) of its value, and had the highest return of the top five for the third quarter: 4.5%. Most of the gains in the 2007 funds were due to increased valuations for energy companies, though write-ups in healthcare and manufacturing also contributed.

The second largest group of funds in the PE index was the 2006 vintage, which represented 23.4% of the index’s value and earned 3.8% for the period.

Capital Distributions in the PE Index Outpaced Contributions for the Sixth Time Out of the Past Eight Quarters

Fund managers in the private equity index called $16.7 billion from investors in the third quarter, an increase of almost one-third over the previous quarter. They distributed $21.6 billion, a drop of almost $8 billion from the prior period, when distributions were at their highest level since the middle of 2007.

Over the last two years, private equity fund managers have distributed 1.3 times as much capital as the called, and in six of those quarters, distributions were higher than contributions.

Largest Sectors in the PE Index All Had Positive Third-Quarter Returns

The performance of all eight of the significantly sized sectors in the PE index was solid during the third quarter, with each sector generating a positive return. Manufacturing companies in the index turned in the strongest performance of the group, earning 5.2%. Healthcare was second, generating a 5.0% return.

Energy Companies Continued to Benefit from Investment Dollars

“For the fourth quarter in a row, energy companies, which represented the second largest sector in the PE index by weight, received the greatest amount of investment capital, though consumer companies were not far behind. Together, the two sectors attracted about 38% of all invested capital for the third quarter, which was a slight increase over the long-term average,” said Keirsten Lawton, Senior Consultant, Private Equity Research at Cambridge Associates.

Returns in the Venture Capital Index Were Mixed

Seven vintages of funds in the venture capital index represented at least 5% of the benchmark’s value in the third quarter. Of these vintages, four had positive returns for the quarter; the three with negative returns included the 2006 vintage, the largest in the index, which dropped 1.0% for the period. The best performing of the largest vintages were funds launched in 2000, which earned 2.5% for the quarter, due primarily to gains for software companies. The earnings for the 2006 funds were dragged down by lost value in information technology (IT) companies.

Distributions in Venture Capital Index Hit Highest Mark in More Than A Decade

Venture capital fund managers called $3.2 billion in the third quarter from their limited partners, a 17.4% decrease from the prior quarter. Managers distributed $5.9 billion, a 5.5% quarter-to-quarter increase and the highest level of quarterly distributions for the VC benchmark since the first quarter of 2001. As in the PE index, this marked the sixth time in the last eight quarters in which distributions outstripped contributions. Together, distributions from the 2000 and 2004 vintage year funds represented one-third of the total distributions for the quarter.

Venture Capital Index Remains Highly Concentrated by Sector

“While the venture capital benchmark has become more diversified by vintage year, it remains tightly concentrated by sector. Only four sectors — healthcare, IT, media, and software — represented more than 5% of the index’s value, and the three largest — IT, healthcare, and software — comprised almost three-fourths of the index’s total value.

For the second consecutive quarter, three of the four largest sectors had positive returns, with software leading the way earning 5.8% for the period. The only loser was IT, which dropped 2.7%,” said Theresa Sorrentino Hajer, Managing Director and Venture Capital Research Consultant at Cambridge Associates.

Healthcare Companies Received the Most Capital in VC Index

Roughly three-fourths of the capital invested in the VC index in the third quarter went to companies in healthcare, IT, and software. Healthcare received the most of any sector, more than 32% of the total investments during the period.

© 2013 PEPD • Private Equity’s Leading News Magazine • 2-5-13

VSS Invests in Cast & Crew Entertainment Services

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Veronis Suhler Stevenson has made a minority investment in Cast & Crew Entertainment Services in conjunction with the previously announced acquisition of the company by ZM Capital, Zelnick Media’s private equity fund.

“We are thrilled to have partners who will continue to champion our aggressive investments in technology, personnel and workflow processes with a proven track record of taking media and entertainment companies to the next level of success,” said Eric Belcher, Cast & Crew’s CEO.

Cast & Crew Entertainment Services is a provider of payroll and other business process outsourcing (BPO) services to the film, television, live entertainment and commercial production markets in North America.  Production companies use the company’s services to manage payroll processing and related regulatory filings; production accounting software; workers’ compensation insurance coverage and claims administration; residuals processing; procurement and purchasing services; labor relations; and production incentives guidance and reporting. Cast & Crew is headquartered in Burbank, CA and has field operations in New York, Albuquerque, Atlanta, Baton Rouge, New Orleans, Detroit, Philadelphia and Wilmington. Canadian offices are located in Toronto and Vancouver.  The company was founded in 1976 (www.castandcrew.com).

“Cast & Crew has an exceptionally strong and forward-thinking management team, a great reputation among its customer base, and industry-leading services and software,” said Hal Greenberg, Partner, VSS Structured Capital II. “We welcomed the opportunity to partner with ZM Capital, Eric Belcher and his team to seek to accelerate organic growth. Furthermore, the investment in Cast & Crew is an excellent example of VSS’s commitment to investing in the business services sector.”

Veronis Suhler Stevenson is a private equity and debt capital fund management company that invests in the media, information and education industries in North America and Europe. The firm provides capital for buyouts, recapitalizations, growth financings and strategic acquisitions to companies and management teams with a goal to build companies both organically and through a focused add-on acquisition program.  Since the closing of the first VSS buyout fund in 1987, VSS has managed four buyout funds and two structured capital funds with aggregate committed capital in excess of $3.1 billion. The six funds have to date invested approximately $2.7 billion in 71 portfolio companies which have in turn completed over 320 add-on acquisitions.  Veronis Suhler Stevenson is based in New York (www.vss.com).

ZM Capital invests in media companies in which the partnership’s capital resources, industry relationships and operational experience can enhance growth and value. The firm is based in New York (www.zelnickmedia.com).

© 2013 PEPD • Private Equity’s Leading News Magazine • 2-5-13

Aurora Capital Group Exits NuCO2

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Praxair has entered into an agreement to acquire NuCO2, a provider of beverage carbonation products and a portfolio company of Aurora Capital Group, for $1.1 billion in cash.  The transaction is expected to close by the end of the first quarter of 2013.

NuCO2 is a national provider of beverage carbonation services to the restaurant and hospitality industries with 162,000 customer locations and 900 employees. The business is expected to generate full year sales in 2013 of about $250 million and EBITDA of about $115 million. The company is based in Stuart, FL (www.nuco2.com).

“NuCO2 offers a compelling value proposition for beverage carbonation,” said Eduardo Menezes, executive vice president of Praxair. “We plan to continue to grow the business in the United States, enhance distribution efficiency utilizing Praxair’s competencies in logistics, and extend NuCO2’s offerings to customers in other regions of the world.”

Aurora Capital focuses principally on control-investments in middle-market industrial, manufacturing and service oriented businesses.  The firm has $2 billion of capital under management and is located in Los Angeles (www.auroracap.com).

Praxair is the largest industrial gases company in North and South America, and one of the largest worldwide, with 2012 sales of $11 billion. The company produces, sells and distributes atmospheric and process gases, and high-performance surface coatings. Industries served include aerospace, chemicals, food and beverage, electronics, energy, healthcare, manufacturing, metals and others. The company is headquartered in Danbury, CT (www.praxair.com).

© 2013 PEPD • Private Equity’s Leading News Magazine • 2-5-13

J.F. Lehman Acquires Alexander/Ryan Marine & Safety

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Drew Marine, a portfolio company of J.F. Lehman, has acquired Alexander/Ryan Marine & Safety and Sea Technology.

Alexander/Ryan is a manufacturer, distributor and safety certification provider for the Offshore and Marine industries. The company is a distributor of some of the best known equipment manufacturers as well as a certified service facility for a variety of rescue and survival craft.  Alexander/Ryan also provides technical services, inspections and field certification for a range of systems found in Offshore and Marine applications.  The company is headquartered in Houston with operations in New Orleans and New Iberia, LA. The company was founded in 1963 (www.alexanderryan.com).

“Drew Marine continues to make significant strides in expanding its fire, safety & rescue suite of capabilities,” said Louis Mintz, a J.F. Lehman & Company partner.  “Alexander/Ryan exhibits many of the attributes J.F. Lehman & Company seeks in acquisition candidates – a leading market position, blue-chip customer base and a strong reputation for quality and performance.  This is yet another milestone for Drew Marine as it continues to pursue new opportunities for growth.”

Drew Marine is a provider of services to the marine industry and specializes in water treatment, fire, safety & rescue, cleaning & coatings, fuel management, welding & refrigeration and sealing products. Drew Marine was acquired by J.F. Lehman & Company in 2009. The company is based in Whippany, NJ (www.drew-marine.com).

Senior debt financing for the acquisition was arranged by BNP Paribas Securities as sole lead arranger.

J.F. Lehman & Company is a middle-market private equity firm focused primarily on the maritime, defense, and aerospace sectors. The firm was founded by Dr. John Lehman, who served six years as Secretary of the United States Navy.  To date, J.F. Lehman has made investments in companies with an aggregate transaction value of approximately $1.6 billion. The firm was founded in 1992 and is headquartered in New York with additional offices in Washington, DC and London (www.jflpartners.com).

© 2013 PEPD • Private Equity’s Leading News Magazine • 2-5-13

Spire Capital Acquires Performance Assessment Network

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Spire Capital has acquired Performance Assessment Network, a provider of testing and management assessment services, from Equifax Workforce Solutions, a subsidiary of Equifax Inc.

Performance Assessment Network (PAN) is the provider of online talent assessments and testing services that aid more than 2,500 corporate and government organizations in hiring and growing top talent. PAN delivers millions of talent assessments annually in both remote and proctored environments and has a testing center network with more than 600 locations. The company was founded in 2000 and is based in Carmel, IN (www.panpowered.com).

“I am very excited to be leading PAN as we enter this phase of significant growth,” said Doug Cole, Chief Executive Officer. “Our goal has always been to provide the best quality content, superior technology and the highest level of service to our customers. Partnering with Spire will provide the strategic focus and resources to fuel our growth in the coming quarters and years.”

Spire Capital invests from $15 million to $40 million in companies with revenues of at least $10 million and EBITDAs of $5 million.  Sectors of interest include business services, information services, media, education and communications.  Spire Capital is currently investing out of its $320 million second fund.  The firm is based in New York with an additional office in West Conshohocken, PA (www.spirecapital.com).

“Today’s organizations view human capital as an asset to be developed and optimized,” said Bruce Hernandez, Partner of Spire Capital. “We absolutely embrace this line of thinking and believe PAN is perfectly positioned to benefit from our partnership which will leverage the company’s unique technology platform, publisher agnostic assessment catalog and vast test center network to grow with both new and existing customers.  Spire brings significant industry expertise to the partnership and looks forward to working with the team at pan to accelerate growth.”

© 2013 PEPD • Private Equity’s Leading News Magazine • 2-5-13

Clairvest Acquires CRS Contractors Rental Supply

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Clairvest Group has invested $39.5 million in CRS Contractors Rental Supply, a provider of construction rental equipment and related merchandise.

“We are excited to partner with a true leader in the Canadian equipment rental field. CRS has a proven business model and solid track record of profitable growth. The management of CRS are significant owners of the business alongside Clairvest and we look forward to working with them in the coming years to help achieve their growth initiatives,” said Mitch Green, Principal of Clairvest.

CRS Contractors Rental Supply is a provider of construction rental equipment and related merchandise. The company has 21 locations in Ontario and more than 270 employees.  The company is based in London, Ontario (www.contractorsrentalsupply.ca).

“CRS is an entrepreneurial business that enjoys success by providing outstanding service to our customers. We believe Clairvest is a great fit to help take CRS to the next level. Our team is ready to drive continued growth through new stores, expansion of product lines, and acquisitions. We are also proud to remain an independent, Canadian-owned business while creating a great opportunity for our next level of management and all employees,” said Steve Fay, CEO.

The Clairvest Group invests in mid-market companies, principally in North America, across a range of industries.  Clairvest looks to invest from $15 million to $50 million in equity capital in companies with EBITDAs from $5 million to $40 million. Desired ownership percentages range from 20% to 80%.  The firm is based in Toronto, ON (www.clairvest.com).

© 2013 PEPD • Private Equity’s Leading News Magazine • 2-5-13

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