Archives for February 27, 2013

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

BDO: Private Equity to be Big Player in Retail M&A Activity in 2013

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According to a new survey from BDO, the retail industry is poised for another year of heavy deal flow as nearly all retail CFOs (94 percent) expect that merger and acquisition activity will increase or remain steady in 2013. These bullish forecasts follow $324.6 billion in global retail and consumer M&A activity in 2012, which was up 33 percent over 2011 and the busiest year since 2007.

While deal flow in 2012 was driven by both financial and strategic buyers, CFOs are more bullish on strategic deals in 2013. With retailers looking to grow omni-channel capabilities and reach new markets overseas through acquisitions, 59 percent of CFOs say strategic buyers will be the primary driver of M&A activity. Still, private equity has been playing an important role, fueling many of the restaurant deals in particular, and 41 percent of CFOs say financial buyers will be the biggest driver of deals this year. CFOs expect to see an EBITDA multiple of 5.2 on average for an acquisition in the retail and consumer product space.

“Private equity investments in the retail and consumer products sector have waned in recent years as retailers worked to navigate the ebb and flow of consumer spending,” said Lee Duran, partner and Private Equity practice leader at BDO. “Still, many private equity funds continue to find compelling investment opportunities in the sector, providing capital to companies with strong value propositions to fuel their expansion into new merchandising channels and markets overseas.”

Retail CFOs also forecast robust IPO activity in 2013. Following 13 U.S. retail public offerings in 2012 (according to Intrepid Investment Bankers), a vast majority of CFOs (83 percent) expect to see more or about the same number of retail IPOs this year. When asked what the biggest driver of a company’s ability to go public in 2013 is, CFOs point to the strength of the U.S. economy and stock market (42 percent), as well as strength of brand (24 percent) as top factors.

“In terms of overall M&A transactions, we’ve seen the fastest start to the year since 2005, and retail looks to be a bright spot for deal-making this year,” says Stephen Wyss, partner in the Retail and Consumer Products practice at BDO USA. “Steadier markets, renewed interest in international growth and the desire for omni-channel capabilities are fueling the investment rebound in retail and consumer businesses.”

These findings are from the seventh-annual BDO Retail Compass Survey of CFOs, which examined the opinions of 100 chief financial officers at leading retailers located throughout the country. The retailers in the study were among the largest in the country. The survey was conducted in January and February of 2013.

Other major findings of the 2013 BDO Retail Compass Survey of CFOs:

E-commerce sector to drive IPO activity
Despite a handful of lackluster IPOs in 2012, there is still significant interest in the e-commerce sector. Two-thirds of retail CFOs think e-commerce will see the most IPO activity in 2013, and a few companies have already taken strides to go public this year by hiring experienced executives and focusing on profitability and predictability of financials. Outside of e-commerce, successful IPOs from Bloomin’ Brands, Chuy’s and Del Frisco’s last year are likely influencing the 22 percent of retail CFOs who expect the food & beverage and restaurant categories to see the most IPOs in 2013.

Sales and EBITDA are priority financial metrics
Sales results are the most common way that shareholders, investors and the industry measure a retailer’s performance, so it’s no surprise that 53 percent of retail CFOs say sales are their primary financial metric. Over one-third (35 percent) say they are most focused on gross sales and 18 percent say they are most focused on comparable store sales. Another 33 percent say they are most focused on EBITDA, a leading indicator of recurring cash flows. Although sales metrics are often looked to first, margins are a key metric in assessing a retailer’s performance, especially in a challenging economic climate. Margin deterioration can be an indicator of poor performance even as sales remain healthy.

CFOs are fairly optimistic on credit markets
Retailers looking to refinance debt in order to lower interest expense may have better luck finding financing at attractive rates this year. A majority of CFOs (55 percent) feel that there is sufficient capacity and appetite in the credit markets and say they expect it will be not challenging (19 percent) or only slightly challenging (36 percent) for retail and consumer product companies to refinance debt in 2013. Still, 19 percent expect it will be very challenging, a sign that some retailers may have greater access than others.

The BDO Retail Compass Survey of CFOs is a national telephone survey conducted by Market Measurement, an independent market research consulting firm, whose executive interviewers spoke directly to chief financial officers using a telephone survey conducted within a scientifically developed, pure random sample of the nation’s retailers.

BDO is a professional services firm providing assurance, tax, financial advisory and consulting services to a range of publicly traded and privately held companies. The firm serves clients through 45 offices and more than 400 independent alliance firm locations nationwide (www.bdo.com).

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