February 7, 2013
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Archives for February 7, 2013

Carrick Capital Partners Invests in Axiom Global

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Carrick Capital Partners has made an investment in Axiom, an outsourced legal services provider. This is the first investment by Carrick since the closing of the firm’s first fund in November of 2012.

Axiom is a 1,000 person new model firm that employs a streamlined cost-structure and accumulated expertise in the business of law to help clients manage legal work more effectively. The firm serves nearly half of the Fortune 100 across 10 offices and 4 delivery centers globally. The company is based in New York (www.axiomlaw.com).

“Carrick Capital Partners is a perfect fit for Axiom. The team at Carrick has unique experience building transformational businesses, they’re savvy investors, and most important, they have real passion for the Axiom mission,” said Mark Harris, CEO of Axiom. “Axiom is well-positioned to help the legal industry transform itself for the better, and Carrick’s growth equity and know-how will play a critical role. We couldn’t be happier and look forward to using the funds to invest in the commercialization of our Managed Services offering, including our delivery capability, center infrastructure, and technology.”

Carrick Capital Partners invests in companies with revenues of $5 million to $ 50 million that serve large markets with business models that allow for increasing profitability as they gain scale.  Carrick focuses on investing in companies that provide technology-enabled service offerings, business process outsourcing, transaction processing, software as a service and enterprise software.  The firm was co-founded in 2012 by Marc McMorris, a former General Atlantic managing director who led investments in business services and software, and Jim Madden, the previous founder and chief executive of Exult, a human resources business processing company that he grew from concept to more than $500 million in revenues.  Carrick Capital Partners is based in San Francisco (www.carrickcapitalpartners.com).

“We seek to invest in companies that possess the right fundamentals to significantly grow their operations,” said Mr. Madden.  “Axiom is a pioneer in their space and uniquely situated for rapid growth.  Our role is to leverage our business building, business process outsourcing experience and our investing acumen on Axiom’s behalf.”

© 2013 PEPD • Private Equity’s Leading News Magazine • 2-7-13

Eureka Growth Capital Acquires Law School Publishing Business from Thomson Reuters

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Eureka Growth Capital has acquired the Thomson Reuters’ Law School Publishing (LSP) business, a provider of higher education learning materials for the law school market.

Eureka Growth Capital formed a new portfolio company, West Academic Publishing, to acquire LSP.  West Academic Publishing represents Eureka’s second platform investment by its third investment fund.  Fifth Third Bank provided debt facilities to support the acquisition.

“Throughout the acquisition process, Eureka has demonstrated that it brings the commitment, resources and seasoned leadership to support the long-term goals and success of the business,” said Chris Parton, CEO of West Academic Publishing. “We look forward to working closely with the Eureka team to build on our long history of serving law school faculty and students with the highest quality educational materials.”

West Academic Publishing provides legal textbooks, casebooks, study guides and other course-related materials in both print and digital media formats for law school faculty and students in the United States. West Academic Publishing provides its products under the West Academic, Foundation Press and Gilbert imprints. The company is headquartered in Eagan, MN (www.westacademic.com).

“We are very excited to partner with an outstanding management team to leverage West Academic Publishing’s leadership position and outstanding relationships with the top legal scholars in the United States to drive new growth in the evolving legal education market,” said Chris Hanssens, Managing Partner of Eureka and a Director of West Academic Publishing. “From West Academic’s first published casebook in 1908 to today’s emerging digital products including the Interactive Casebook Series and Law School Exchange, West Academic Publishing has continued to provide the highest quality, innovative learning materials focused on teachability and current pedagogical trends.”

Eureka Growth Capital makes control and non-control investments in companies with $10 million to $75 million in revenue. Initial equity investments range from $4 million to $10 million, but larger investments can be made with co-investment from the firm’s limited partners. The firm prefers investment opportunities in the Mid-Atlantic and Eastern US. The firm was founded in 1999 and is based in Philadelphia (www.eurekagrowth.com).

“The legal education market is facing challenges as enrollments decline. West Academic Publishing’s ability to provide best-of-breed products to law schools, faculty and students can provide solutions for our law school customers and opportunities for significant growth as the legal economy recovers,” said Chris Miller, a Principal with Eureka who will also join West Academic Publishing’s Board of Directors.

© 2013 PEPD • Private Equity’s Leading News Magazine • 2-7-13

What is Carried Interest?

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Recent proposals from policymakers in Washington to change the tax treatment of carried interest highlight a general misperception of what carried interest is and why it is appropriately treated as a capital gain.  In an effort to better explain carried interest, the Private Equity Growth Capital Council released today a new educational whiteboard video entitled, “What is Carried Interest?” to address common misconceptions about carried interest. The video runs just over 3 minutes. A link to view the video is available at the end of this article.

“Carried interest is commonly misunderstood in public discourse. Our newest whiteboard video demystifies the topic and answers questions about what carried interest really is, how it works and why it’s appropriately taxed at the capital gains rate,” said Steve Judge, president and CEO of the Private Equity Growth Capital Council. “Carried interest is an important part of the private equity business model – a model that is responsible for pumping hundreds of billions of dollars into the U.S. economy each year, while strengthening businesses for the long-term.”

Carried interest is taxed at the capital gains rate because it is a profits interest on a long-term capital asset.  This policy encourages the risk taking that is required to save, start and grow companies. Changing the taxation of carried interest would upend a long-standing, successful policy that has helped America prosper for more than 100 years. It is commonplace in partnerships including private equity, venture capital, real estate partnerships and general business partnerships.

The video is the latest offering from the PEGCC’s “Private Equity at Work” initiative, an ongoing effort to educate people about key aspects of the private equity industry (www.PrivateEquityAtWork.com).

The Private Equity Growth Capital Council is an advocacy, communications and research organization and resource center established to develop, analyze and distribute information about the private equity and growth capital investment industry and its contributions to the national and global economy. Established in 2007, the PEGCC is based in Washington, D.C. (www.pegcc.org).

Click HERE to view the video “What is Carried Interest”.

© 2013 PEPD • Private Equity’s Leading News Magazine • 2-7-13

LBC Credit Partners Backs Latest Buy by Enhanced Equity Funds

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LBC Credit Partners served as joint lead arranger and syndication agent for a $50 million senior secured credit facility to support the purchase of the National Pain Institute by Prospira Pain Care, a pain management platform and a portfolio company of Enhanced Equity Funds, Webster Capital and Pulse Equity Partners.

The National Pain Institute focuses on pain relief, physical conditioning, functional restoration, and psychological rehabilitation. The company is based in The Villages, FL (www.natpain.com).

Prospira PainCare is an operator of physician practices in California and the Southeast U.S. focused on the comprehensive pain management sector. The company is headquartered in Mountain View, CA (www.prospirapc.com).

Prospira was formed in July 2012 with the acquisition of The Spine Center of Southeast Georgia and the affiliated Brunswick Pain Treatment Center, a neurosurgery and pain management practice located in Southeast Georgia.  Shortly thereafter in September 2012, Prospira purchased Bay Area Pain & Wellness Center, a pain management physician practice in the San Francisco Bay Area.  Most recently, in December 2012 Prospira closed on the acquisition of National Pain Institute, one of the largest pain management providers in Florida.

LBC Credit Partners is a provider of middle market financing including senior term, unitranche, second lien, junior secured, and mezzanine debt; and equity co-investments to companies with EBITDAs generally greater than $10 million. LBC invests from $10 million to $50 million per transaction supporting acquisitions, growth strategies, refinancings, recapitalizations, and restructurings. LBC has more than $1.25 billion of capital under management and has offices in Philadelphia, Chicago and New York (www.lbccredit.com).

Enhanced Equity Funds invests from $10 million to $50 million in companies with less than $100 million in revenues.  The firm manages approximately $600 million of committed capital across two funds with the most recent fund raised in 2010.  Enhanced Equity Funds is based in New York (www.enhancedequity.com).

Webster Capital invests in branded consumer, business- to-business, and healthcare services companies with EBITDAs from $3 million to $15 million and transaction values less than $100 million. The firm is currently investing Webster Capital II, a $205 million fund which closed in 2007.  Webster was founded in 2003 and is based in Waltham, MA (www.webstercapital.com).

Pulse Equity Partners invests from $10 million to $100 million in growth equity capital and build-ups in fragmented, high growth markets. Sectors of interest include health, active living and nutrition. The firm is based in New York (www.pulsequity.com).

© 2013 PEPD • Private Equity’s Leading News Magazine • 2-7-13

Industrial Products M&A Activity Increases Modestly in Fourth Quarter

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Overall merger & acquisition activity in the global industrial products industry rose modestly on a sequential basis during the fourth quarter of 2012 according to PwC.  Mega deals (transactions worth more than $1 billion) made a comeback, driving total value in several sectors, while financial investors increased their participation in certain market sectors as well.  PwC’s industrial products practice examined activity in the fourth quarter of 2012 across six sectors: aerospace & defense, chemicals, engineering & construction, industrial manufacturing, metals and transportation & logistics.

Across the entire industrial products sector, there were 238 transactions worth $50 million or more, totaling $89.1 billion in the fourth quarter of 2012, compared to 164 deals and $84 billion in total value during the third quarter of 2012.  In the fourth quarter of 2011, there were 191 announced transactions, totaling $74 billion in total value. Looking at the full year, there were 789 transactions worth $50 million or more, totaling $333.7 billion in 2012, down from 846 deals and $383.1 billion in total value during 2011.

“The M&A environment across the global industrial products industry showed an uptick in activity across several sectors during the fourth quarter, despite continued concerns regarding the global economy,” said Robert McCutcheon, U.S. Industrial Products Leader for PwC. “We also saw pockets of increased participation from financial investors, who are beginning to take steps to secure longer term growth opportunities, supported by their strong balance sheets and ample liquidity. Looking ahead, the M&A market should continue to improve, as geo-political concerns are addressed and we begin to see signs of a more stable economic recovery.”

While Asia and Oceana remained the most active region, the U.S. performed well in select industrial products sectors, with local deals driving the majority of activity. There were 163 local transactions worth $50 million or more totaling $75.5 billion in the U.S. during 2012, up from 157 such deals totaling $40.9 billion in 2011. The majority of growth came in the fourth quarter, with the number of local U.S. deals rising to 52.

“The domestic market is continuing to attract increased attention from a wide range of players given the improving manufacturing climate, return of manufacturing to the U.S. and the regionalization of supply chain efforts closer to the customer,” said Mr. McCutcheon. “Re-shoring manufacturing and renewed deal making confidence is being driven in part by the benefits of shale gas production on supply chain economics and production processes. These trends are in line with the results of our recent Manufacturing Barometer report, which showed improving sentiment among U.S. industrial manufacturers regarding the prospects of the domestic economy. Additionally, our recent CEO survey found that U.S. CEOs are more intent on M&A in 2013 than their global peers, and they’re concentrating on consolidation and expansion in the U.S. market.”

M&A market activity increased sequentially in the fourth quarter of 2012 in several sectors including aerospace & defense, metals, transportation & logistics and engineering & construction. The increase in M&A activity in the metals market was particularly notable, with both total transaction value and average deal value more than doubling over the third quarter of 2012.  There were 26 transactions worth $50 million or more, totaling $10.7 billion in the metals industry during the fourth quarter, representing a 160 percent increase in value over the third quarter of 2012, which saw 21 deals with a total value of $4.1 billion. In the engineering & construction sector, there were 57 deals in the fourth quarter totaling $13.9 billion, an increase in value and volume compared to the third quarter of 2012, which saw 31 transactions totaling$10.8 billion, as well as the fourth quarter of 2011 with 36 deals totaling $13.1 billion.

Strong fourth quarter M&A activity in the transportation & logistics industry represented the highest quarterly volume in three years. There were 68 transactions worth $50 million or more, totaling $26.5 billion, a significant increase compared to 39 deals representing $15.5 billion in the third quarter of 2012 and 36 deals totaling $14.8 billion in the fourth quarter of 2011. In addition, total fourth quarter 2012 M&A activity increased in the aerospace & defense sector, with aerospace deals continuing to represent the bulk of activity. Total deal value reached $8.7 billion in the fourth quarter of 2012, close to doubling from the $4.5 billion in total deal value recorded in the third quarter.

While mega deal activity for all of 2012 was slightly below 2011, there was an increase in mega deals across several aerospace & defense sectors during the fourth quarter of 2012.  Mega deals in the metals market accounted for $5.6 billion in value or more than half of total deal value in the sector during the fourth quarter.  In addition, fourth quarter M&A activity in the aerospace & defense sector was primarily driven by two mega deals, which accounted for approximately 80 percent of total deal value.  Mega deal activity also remained strong in the transportation & logistics market.  There were a total of 16 mega deals announced in the sector during 2012, including four mega deals in the fourth quarter.  Looking at the overall IP sector, there were a total of 72 mega deals during 2012, for a total value of $168 billion, compared to 74 mega deals in 2011, valued at $202.3 billion.

Strategic investors continued to drive the majority of deal activity across the industry during the fourth quarter and full year, reflecting their focus on longer-term investment initiatives.  However, financial acquirers increased their participation in the M&A market in select sectors.  In the metals industry, financial investments surged as a percentage of all deals in the fourth quarter, rising to 49 percent, compared to 29 percent for the full year of 2012 and 27 percent for all of 2011.  Financial investors have also continued to gradually gain momentum in the engineering & construction sector. In 2012, the participation of financial advisors was higher than the average 10-year rate of approximately 33 percent and they were an active participant in some of the largest deals during the year. For the full year, participation among financial investors increased modestly in the metals, engineering & construction and transportation & logistics segments, although levels remained below 40 percent of deal volume.

“The increased activity among financial investors in select sectors demonstrates improved sentiment and may portend a more sustainable recovery in these markets in the year ahead.   Notwithstanding continued global economic uncertainty, a range of factors including solid private equity fundraising, strong balance sheets and the availability of low-cost debt financing, support the potential for increased M&A activity among investors going forward,” said Mr. McCutcheon.

PwC’s Industrial Products practice provides financial, operational, and strategic services to global organizations across the aerospace & defense, business services, chemicals, engineering & construction, forest, paper, & packaging (FPP), industrial manufacturing, metals, and transportation & logistics industries.  For more information please visit: www.pwc.com/us/en/industrial-products.

© 2013 PEPD • Private Equity’s Leading News Magazine • 2-7-13

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