Archives for January 17, 2014

Private Equity and Real Estate to Lead 2014 Allocations

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Major institutional investors around the world are poised to increase their allocations to alternative investments, with a bias towards real estate and real assets, during 2014, according to a global survey of institutions conducted by BlackRock.

“Within the alternatives category, we believe hedge funds and private equity also will command a growing role in institutional portfolios in 2014, with investors casting a wide net for appropriate diversification tools,” said Robert Goldstein, Senior Managing Director and head of BlackRock’s Institutional Client Business and BlackRock Solutions.

Approximately half of institutions surveyed– 49 percent – expect to increase their real estate allocation and over 40 percent indicated they will increase their investment in real assets this year. At the same time, about one-third of the institutional investors surveyed intend to reduce their cash holdings in 2014.

“Divergent economic and geopolitical conditions globally offer institutions a menu of real estate and real asset opportunities that meet a variety of investment objectives,” said Mr. Goldstein.  “In real estate, while core, income producing investments in developed markets are still in favor because of their liquidity and safe cash flows, we anticipate that institutions looking for income-producing alternatives will turn their attention to more opportunistic real estate investments outside their home markets.”

Nearly 30 percent of institutions surveyed intend to increase their hedge fund allocations this year. In the Americas, over 40 percent of institutions are likely to increase their hedge fund allocation; none is planning a decrease. The trend is less true for EMEA, where 35 percent of institutions intend to allocate less to hedge funds and just 20 percent will allocate more.

Approximately one-third of institutions surveyed anticipate allocating more to private equity. Private equity is less popular with EMEA institutions and smaller investors (those with less than $20 billion in AUM), with these investors indicating they will either maintain or reduce current private equity allocations.

BlackRock surveyed approximately 100 institutional investors representing the firm’s Americas, Europe/Middle East/Africa (EMEA), and Asia-Pacific (APAC) markets, including corporate and private pension funds, insurers, investment managers, and government entities. In total, the investors surveyed represent more than $6 trillion in assets under management (AUM), with an average AUM of $70 billion.

BlackRock is an investment management, risk management and advisory services company with institutional and retail clients worldwide. At December 31, 2013, BlackRock’s AUM was $4.3 trillion. BlackRock is headquartered in New York (www.blackrock.com).

© 2014 PEPD • Private Equity’s Leading News Magazine • 1-17-14

Private Equity Continues to Beats S&P 500 Over Long-Term

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Private equity returns significantly outperformed the S&P 500 in the most recent Performance Update from the Private Equity Growth Capital Council.

Returns from private equity (net of fees) beat the S&P 500 (including dividends) for 5-year and 10-year horizons as of June 30, 2013 by 1.2 and 6.8 percentage points, respectively. Despite generating over 15 percent annualized returns, private equity funds underperformed the S&P 500 in 1-year and 3-year horizons due to the public market rally.

“Investors in private equity, the majority of whom are pension funds, university endowments and charitable foundations, benefit from the consistent outperformance of private equity over public markets,” said PEGCC President and CEO Steve Judge. “Private equity is patient capital that drives economic growth by strengthening companies over the long-term. It is a winning formula for both investors and the national economy.”

The PEGCC’s measure for private equity fund performance is based on the median of publicly available benchmarks. This measure indicates private equity funds returned an annualized 14.1, 8.2, 15.7, and 15.6 percent during 10-year, 5-year, 3-year and 1-year periods, respectively.

“Private equity continues to outperform public markets over the long-term,” said Bronwyn Bailey, PEGCC vice president of research. “The sharp rebound in public markets in 2012 and 2013 will likely affect short-term comparisons of the S&P 500 to private equity. Yet, consistent, long-term private equity performance helps to maximize returns and mitigate volatility risk for the portfolios of pension funds, charitable foundations and university endowments.”

PEGCC calculates the excess returns from private equity by comparing the median values from third party data providers to the S&P 500 Total Return index. The research was compiled using data as of June 30, 2013, the most current data available. All returns are calculated net of fees.

For a FREE copy of the Private Equity Performance Update click HERE.

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, DC (www.pegcc.org).

© 2014 PEPD • Private Equity’s Leading News Magazine • 1-17-14

Summit Partners Adds Pro to Pursue Oilfield Services Companies

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Summit Partners has hired Mark Crews as a new Executive Partner to acquire and build technology-enabled oilfield products and services businesses. In this role, he will help identify opportunities and assist in the value creation process post-investment.

“Summit Partners has deep sector expertise in the energy and technology industries,” said Summit Principal Jay Pauley. “The North American energy market is an attractive growth segment of the economy, and we’re excited to work with Mark to invest in energy technology and service companies that are redefining this sector. We are actively looking for acquisitions and believe there are a number of compelling investment opportunities in the market. ”

Mr. Crews brings more than three decades of international experience in the oilfield products, services and technology industry. Most recently, Mr. Crews worked at Lufkin Industries as Senior Vice President and General Manager of the Oilfield Division where he was responsible for all manufacturing, sales, service and engineering operations worldwide. During his five-year tenure, Mr. Crews developed and implemented a global growth strategy for Lufkin’s Artificial Lift business segment (artificial lift, used in 94 percent of the roughly 1 million oil-producing wells around the world, helps lift resources to the surface in reservoirs with low pressure and improves the efficiency of naturally flowing wells). Mr. Crews’ strategy increased revenue of the Artificial Lift business segment from $360 million to $1.2 billion, culminating in the July 2013 sale of the company to GE Oil & Gas for $3.3 billion. Prior to Lufkin, Mr. Crews was employed by Cameron International where he served most recently as Vice President, Subsea Technology. In addition, Mr. Crews held a number of domestic and international executive management positions with Cameron during his three-decade career at the company.

“The technological innovation that is redefining the North American energy market is in the early stages of being exported to the rest of the world. As a result, the opportunity to build leading energy product and technology companies has never been better,” said Mr. Crews. “Summit Partners has a long history of backing experienced managers and providing them with the resources and support required to build successful companies through both organic growth and acquisitions, and I am thrilled to work with Summit.”

Mr. Crews holds a BS degree in Mechanical Engineering from Texas A&M University and is a graduate of the Harvard Business School Program for Management Development.

Summit Partners provides private equity and venture capital for growth companies. Founded in 1984, Summit has raised more than $15 billion in capital and has provided equity, recapitalization, and management buyout financing to more than 380 companies across a range of industries. Summit Partners has offices in Boston, Palo Alto, London, and Mumbai (www.summitpartners.com).

© 2014 PEPD • Private Equity’s Leading News Magazine • 1-17-14

Brookside Backs Topspin Buy of HCOA Fitness

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Brookside Mezzanine Partners has backed the acquisition of HCOA Fitness, an operator of fitness centers, by Topspin Partners.

Brookside provided a unitranche debt facility and equity co-investment to support the Topspin acquisition. “Through our acquisition of HCOA, Brookside has again shown itself to be one of Topspin’s most supportive and trusted financing partners,” said Topspin Managing Director Leigh Randall. “We look forward to working with Brookside in building yet another successful portfolio company.”

Brookside Mezzanine Partners provides subordinated debt and minority equity to small and mid-sized companies seeking long-term capital to support buyouts, leveraged recapitalizations, strategic acquisitions, dividends and growth capital. Target companies generally have trailing twelve month revenue of at least $15 million and EBITDA of at least $3 million. Brookside manages $500 million through three mezzanine funds. The firm was founded in 2001 and has offices in Stamford, CT and Boston, MA (www.brooksidemezzanine.com).

HCOA Fitness is an operator of 18 full service fitness centers throughout Puerto Rico (15) and Miami (3). The company’s co-ed family fitness centers offer members an array of strength and cardiovascular equipment, group exercise and cycling classes, and personal training services. HCOA Fitness is headquartered in Miami (www.hcoafitness.com).

Topspin LBO makes control investments in profitable and established lower middle-market businesses. Sectors of interest include consumer products and services, business and information services, health and wellness, food and beverage, retail, and security. The firm is based near New York City in Roslyn Heights, NY (www.topspinlbo.com).

TG Capital, which acquired HCOA Fitness in October 2009, will remain as an equity holder and will be an active partner in the business. “We have enjoyed our association with HCOA over the past four years and are thrilled to partner with Topspin to support HCOA’s future growth,” said Johnathan Robertson, President and Managing Director of TG Capital Corp.

© 2014 PEPD • Private Equity’s Leading News Magazine • 1-17-14

Hamilton Robinson Acquires Sound Seal

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United Process, Inc. (DBA Sound Seal) has been acquired by Hamilton Robinson Capital Partners in partnership with the company’s management team. The retiring founders of SoundSeal, Barry Lyons and Rich Mulcahy, will maintain an ownership interest in the company.

Sound Seal is a manufacturer of commercial and architectural acoustic noise control products. The company’s Architectural and Flooring divisions provide products used for interiors, and the Industrial division provides products used for community noise, construction noise and in-plant noise abatement. Sound Seal’s products are marketed under the Industrial, Impacta, Woodtrends and Sound Quality brand names. The company was founded in 1978 and operates a 50,000 sq. ft. facility (headquarters) in Agawam, MA (www.soundseal.com).

“We find that Sound Seal’s culture, products, financial performance and focus on delivering world-class solutions is a very powerful combination,” said Chris Lund, Partner at Hamilton Robinson. “We are thrilled to support Sound Seal’s management team in their purchase of the company and to partner with Joe Lupone as he leads the company as CEO in its next phase of growth and development.

Hamilton Robinson Capital Partners invests in small, privately held manufacturing, distribution and service businesses. The firm was founded in 1984 and is headquartered in Stamford, CT (www.hrco.com).

Webster Bank, a commercial bank based in Farmington, CT (www.websteronline.com) provided the financing to support the transaction. Focus Investment Banking (www.focusbankers.com) served as advisors to Sound Seal’s owners.

© 2014 PEPD • Private Equity’s Leading News Magazine • 1-17-14

RoundTable Exits Aqua Pharmaceuticals

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RoundTable Healthcare Partners has completed the sale of Aqua Pharmaceuticals to Almirall SA for up to $403 million in cash. The consideration includes $328 million of cash at closing plus up to $75 million of contingent payments. RoundTable acquired a majority interest in Aqua in June 2010.

“Aqua is another example of RoundTable partnering with owner/founders, and working together, taking the business to another level of growth and value,” said Lester Knight, Founding Partner and Co-Chairman of RoundTable. “This transaction marks the third portfolio company sale from RoundTable’s $500 million Fund II, and at closing, generated a return of more than five times invested equity capital for our investors.”

Aqua is a specialty pharmaceutical company focused on acquiring, developing and marketing branded, prescription dermatology products. Aqua promotes five brands throughout the United States including Monodox, an antibiotic used to treat acne; Cordran lotion and cream, a topical corticosteroid used for the relief of inflammatory dermatoses (lesions or eruptions of the skin); Fluoroplex cream, used for the treatment of actinic keratoses (small, rough, raised area found on areas of your skin that have often been exposed to the sun for a long period of time); Xolegel Gel, used for the treatment of seborrheic dermatitis (a common, inflammatory skin condition); and Verdeso Foam, used to treat steroid responsive dermatoses. Aqua was co-founded in 2004 by Craig Ballaron and Jay Gooding and is headquartered in West Chester, PA (www.aquapharm.com).

RoundTable Healthcare Partners is an operating-oriented private equity firm focused exclusively on the healthcare industry. RoundTable manages $1.9 billion in capital, including three equity funds totaling $1.5 billion and two subordinated debt funds totaling of $400 million. The firm is based in the Chicago suburb of Lake Forest (www.roundtablehp.com).

“RoundTable has been an important partner to Aqua since 2010,” said Craig Ballaron, Co-founder and Chief Executive Officer of Aqua. “During our partnership, they supported our efforts to expand our senior management team and salesforce, accelerate investment in our R&D pipeline and support several important product acquisitions. RoundTable has been an ideal partner for Aqua during this important growth phase.”

The buyer of Aqua, Almirall, is a global pharmaceutical company that provides products focused on the treatment of respiratory, dermatological, gastrointestinal and pain diseases. The company is headquartered in Barcelona, Spain (www.almirall.com).

“The Aqua management team, led by Co-Founder and CEO Craig Ballaron, has created an industry-leading specialty dermatology pharmaceutical company, achieving exceptional growth through its strong sales organization and strategic product acquisitions while making significant R&D investments,” said Jack McGinley, Founding Partner of RoundTable and Chairman of Aqua. “We believe that Almirall will be a strong strategic partner for Aqua, its employees and customers going forward.”

Deutsche Bank Securities acted as exclusive financial advisor to Aqua, and Sidley Austin acted as the exclusive legal advisor to RoundTable on this transaction.

© 2014 PEPD • Private Equity’s Leading News Magazine • 1-17-14

Persistence Capital Partners Exits Lab-Biomedic

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Persistence Capital Partners has sold its portfolio company, Lab-Biomedic, to Gamma-Dynacare, a Canadian subsidiary of publicly traded Laboratory Corporation of America. Persistence acquired Lab-Biomedic in 2010.

Lab-Biomedic provides clinical laboratory services to medical clinics, corporate clients, insurance companies and clinical research organizations. Clinical specialties include cytopathology and screening for respiratory and food allergies. Lab-Biomedic serves a range of eastern Canadian clients through its laboratories in Montreal and Quebec City. The company was founded in 1998 (www.labbiomedic.com).

“Lab-Biomedic represents a benchmark for service and excellence in the clinical laboratory, insurance, and contract research sectors in Canada,” said Lloyd Segal, Managing Partner at Persistence. “It has been a privilege collaborating with Marc Hamilton and his team, as they have set a new standard for innovation and delivered outstanding returns to Persistence. We wish them continued success as they become part of Gamma-Dynacare.”

Persistence Capital Partners invests in Canadian based or operated healthcare companies that have EBITDAs from $1 million to $10 million. The firm is headquartered in Montreal (www.persistencecapital.com).

Laboratory Corporation of America (NYSE: LH) operates one of the largest clinical laboratory networks in the world, with a United States network of 36 primary laboratories. Before a merger with National Health Laboratory in 1995, the company operated under the name Roche BioMedical. LabCorp performs its largest volume of specialty testing at its Center for Esoteric Testing and headquarters in Burlington, NC (www.labcorp.com).

© 2014 PEPD • Private Equity’s Leading News Magazine • 1-17-14