Archives for February 12, 2014

Yellow Wood Acquires Dr. Teal’s

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Parfums de Coeur, a portfolio company of Yellow Wood Partners, has acquired Dr. Teal’s Therapeutic Solutions from health and beauty company Advanced Beauty.

Dr. Teal’s is a leading brand across multiple personal care categories including specialty bath, foot care and first aid. In addition to its line of bath and body products, Dr. Teal’s is the largest branded Epsom salt brand in the US and has grown by over 50% annually over the past five years. Dr. Teal’s products are sold in more than 30,000 food, drug and mass retail outlets in the US and through several major retailers in Canada and other countries. Dr. Teal’s is based in Dallas (www.drteals.com).

“Dr. Teal’s is an ideal add-on investment for Parfums de Coeur, as we believe that the Parfums management team will be able to add even more firepower to an already growing and well positioned brand,” said Dana Schmaltz, a Partner at Yellow Wood. “The acquisition fits our strategy of building Parfums into a broader personal care business in many ways. We thank Chris and Cindy McClain of Advanced Beauty and their management team for giving us this exclusive opportunity to buy a brand they have nurtured extremely well.”

Parfums de Coeur (PDC), acquired by Yellow Wood Partners in September 2012, is a mass-market marketer of perfumes, body sprays, colognes, and bath products. PDC markets and distributes its products under four brands: BOD Man, Body Fantasies, Designer Imposters and Calgon. The company was founded in 1981 and is headquartered in Darien, CT (www.parfumsdecoeur.com).

“The acquisition of Dr. Teal’s is the second add-on acquisition we have completed since Yellow Wood purchased Parfums de Coeur. Yellow Wood continues to broaden our product line, and it underscores the valuable role the firm plays in utilizing their deep consumer products industry knowledge and connections,” said James Stammer, CEO, Parfums de Coeur.

Yellow Wood Partners seeks to invest in consumer brands and companies with revenues between $30 million and $200 million, with targeted equity investments ranging from $10 million to $80 million per investment. The firm was founded in 2011 by Dana Schmaltz and Peter Mann; both have experience investing in and operating consumer packaged goods businesses such as Blacksmith Brands, Prestige Brands, Meow Mix, Medtech, and the Spic And Span Company. Yellow Wood has offices in Boston, MA and Irvington, NY (www.yellowwoodpartners.com).

Advanced Beauty’s is a marketer of spa-quality bath and body products. Advanced Beauty products are sold through retail, drug, grocery and specialty stores nationwide. The company was founded in 2003 and is based in Dallas (www.advancedbeautysystems.com).

Houlihan Lokey (www.hl.com) served as the exclusive financial advisor and assisted in structuring and negotiating the transaction on behalf of Advanced Beauty.

“Dr. Teal’s is a tremendous brand, offering the rare combination of real therapeutic solutions with truly experiential bath and body products that are as delightful to use as they are effective,” said Mr. Stammer. “Dr. Teal’s is the perfect complement to Parfums de Coeur’s leading fragrance and specialty bath offerings. We look forward to continue to grow the Dr. Teal’s brand with additional marketing resources to build on the current success of the brand with our broader customer base.”

© 2014 PEPD • Private Equity’s Leading News Magazine • 2-12-14

Graham Partners Acquires Global Leading Foods

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Universal Food, a portfolio company of Graham Partners, has purchased the assets of Global Leading Foods. The acquisition provides Universal with broader geographic reach, access to new customers, and the opportunity to serve new end markets.

Global Leading Foods (GL Foods) is a provider of high pressure pasteurization services (HPP). HPP is a non-thermal, non-chemical based method of pasteurization that uses hydrostatic pressure to eliminate foodborne pathogens and offers the ability to produce all natural products with improved nutritional value and extended shelf life. HPP technology is one of the most dynamic and fast growing segments of the broader food industry. GL Foods is based near Dallas in Coppell, TX (www.glfoodsusa.com).

Universal, acquired by Graham Partners in December 2012, is a provider of high pressure pasteurization, cold storage, and other value-added services to food and beverage manufacturers. The company is comprised of two divisions – Universal Pasteurization Company, a HPP provider with locations in Lincoln, NE; Villa Rica, GA; and Coppell, TX; and Universal Cold Storage, a provider of cold storage based in Lincoln, NE (www.universalcoldstorage.com).

The acquisition of GL Foods represents the second step Universal has taken to achieve its strategic objective of expanding its HPP footprint – in this case, into the Southwest. Just four months ago, Universal completed its first expansion, into the Southeast, by developing a new, 90,000 square foot facility in Georgia. Graham and Universal are focused on continuing Universal’s expansion into new geographic regions in order to meet increased demand for HPP.

“Graham Partners has developed a successful formula for sourcing proprietary, niche investment opportunities, and Universal and GL Foods are a testimony to this program’s success,” said Andrew Snyder, Managing Principal at Graham Partners. “We identified HPP as a cutting edge technology that delivers the food safety, quality, and nutritional value desired by consumers as well as producers and retailers. We initiated our investment in Universal with the vision of building the leading HPP platform capable of delivering elevated food freshness and wellness nationwide.”

Graham Partners seeks to acquire companies with EBITDA between $5 million and $50 million, and will invest in smaller companies as add-on acquisitions to existing portfolio companies. The firm is sponsored by the Graham Group, an industrial and investment concern with interests in plastics, packaging, machinery, building products and outsourced manufacturing. Graham Partners was founded in 1988 and is headquartered in Philadelphia (www.grahampartners.net).

© 2014 PEPD • Private Equity’s Leading News Magazine • 2-12-14

PNC Mezzanine Capital Invests in Mountainside Fitness

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PNC Mezzanine Capital has committed to provide Mountainside Fitness, an Arizona-based fitness chain, with growth capital of up to $40 million in order to expand the company.

“We are extremely excited about our partnership with PNC Mezzanine Capital,” said Tom Hatten, President of Mountainside Fitness. “This is the next step in our ability to grow not only locally, but in markets across the country.”

Mountainside Fitness operates 10 fitness centers in the metro-Phoenix area that have approximately 45,000 members. Each of the company’s centers offer free fitness classes, strength equipment, cardiovascular equipment, basketball courts, childcare, kids exercise equipment, theatre rooms and cafés. The company has three additional Arizona fitness centers currently under construction in Arrowhead, Desert Ridge and Queen Creek (www.mountainsidefitness.com).

“Mountainside Fitness is now poised to expand the brand that the team has worked so hard to establish over the past 23 years,” said Douglas Brosius, Partner at PNC Mezzanine Capital. “We are proud that the company has selected PNC Mezzanine Capital as its partner to support the next phase of their growth.”

PNC Mezzanine Capital, a division of The PNC Financial Services Group, provides financing for buyouts, acquisitions, recapitalizations and growth for companies in a range of industries, including consumer and business services, niche manufacturing and value-added distribution. PNC Mezzanine Capital was founded in 1989 is based in Pittsburgh (www.pncmezzanine.com).

© 2014 PEPD • Private Equity’s Leading News Magazine • 2-12-14

Pfingsten Exits Hy-Bon

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Pfingsten Partners has sold its portfolio company Hy-Bon Engineering Company to Regal Beloit Corporation.

“We were pleased to partner with the Hy-Bon management team to deliver this outstanding return for our shareholders. The successful sale of Hy-Bon to Regal Beloit clearly demonstrates the continuing strength of Hy-Bon’s business model,” said Scott Finegan, Pfingsten Managing Director.

Hy-Bon Engineering Company, acquired by Pfingsten in July 2009, is a manufacturer of vapor recovery units and replacement parts and a provider of related field and emissions testing services for the oil production, biogas, and industrial markets. Products are sold to oil and gas companies and include customized vapor recovery units with a variety of compressor styles for storage tanks, production facilities, and oil fields both on and offshore. Hy-Bon is headquartered in Midland, TX (www.hy-bon.com).

“Hy-Bon management, in partnership with Pfingsten, built a leading provider of highly technical vent gas management solutions. Pfingsten’s support for new products, regional service center expansion and acquisitions was invaluable,” said Larry Richards, Hy-Bon President and CEO.

Pfingsten Partners invests in middle market manufacturing, distribution and business services companies. Since completing its first investment in 1991, Pfingsten Partners has acquired 93 companies and has over $1 billion of capital under management. The firm is based in Chicago and has additional offices in India and China (www.pfingsten.com).

Baird acted as the exclusive financial advisor to Hy-Bon and Pfingsten. Baird’s deal team was led by Joe Packee, Managing Director.

“As the U.S. expands its energy production, there is a need to implement products and services that capture, and ideally re-use, the gases that are discharged as a part of this production and related storage,” said Mr. Packee. “With an increased focus on the economic benefits and the environmental and safety matters surrounding our country¹s growing oil production capabilities, solutions provided by Hy-Bon are of great importance.”

Regal Beloit Corporation (NYSE: RBC) is one of the largest electric motor manufacturers in the world. The company had sales in 2013 of more than $3 billion. Regal Beloit was founded in 1955 as Beloit Tool Corporation and is headquartered in Beloit, WI (www.regalbeloit.com).

© 2014 PEPD • Private Equity’s Leading News Magazine • 2-12-14

More Than A Whimper, Less Than A Bang

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Whatever the sound is in between a bang and a whimper is the sound that most aptly describes middle market deal activity at year-end 2013, according to GF Data’s February M&A Report.

The 187 private equity firms that are active contributors to GF Data reported 56 completed transactions in the $10 million to $250 million value range in the fourth quarter of 2013, well below the 101 deals closed in 2012’s tax-driven year-end rush. However, this represents a steady pick-up in deals actually being completed over the course of last year.

Valuations averaged 6.7x Trailing Twelve Months (TTM) Adjusted EBITDA for the quarter, the highest mark since 3Q 2012.

“We believe the firming up in valuations reflects a combination of trends,” said Andrew Greenberg, GF Data’s CEO, “A bounce back off of the “false bottom” created by deal dynamics surrounding the 2012 year-end; the continued scarcity of outstanding properties being offered for sale; and the hostility of smaller business sellers to post-LOI price concessions – they either close near the original price or their deal doesn’t happen. “

With its year-end edition, GF Data also introduced a new Leverage Report offering a more intensive view of debt and capital structure trends, specific to the lower middle market.

“Debt multiples for total and senior debt remained in the low fours and low threes respectively,” said Graeme Frazier, IV, GF Data Principal and Co-Founder. “While the average total debt multiple actually dropped in the fourth quarter, the more detailed data we now publish enables subscribers to drill in and see that this is a result of deal mix rather than evidence of a secular trend.”

“GF Data’s Leverage Report confirms senior lenders are responding to the private equity market with extremely competitive debt pricing and fees. Good capital structures and quality management allows us to manage risk, which is reflected in the capital pricing,” said Joseph Finley, President, TriState Capital Bank.

GF Data provides reliable external information for use in valuing and assessing M&A transactions to private equity firms, investors, lenders and other users. GF Data collects and publishes proprietary transaction information from private equity groups on a blind and confidential basis. Two hundred and nineteen private equity firms have provided information on deals included in the latest report. Data contributors and paid subscribers receive four products: (1) a quarterly report containing high-level valuation, volume and leverage data; (2) a quarterly supplement offering detailed information on debt and capital structure trends; (3) a semi-annual supplement o indemnification cap, escrow and other details; and (4) continuous access, through GF Data’s secure website, to detailed valuation data organized by NAICS code.

For information on subscribing or on contributing data as a private equity participant, please contact Bob Wegbreit at [email protected] or 610-260-6263.

© 2014 PEPD • Private Equity’s Leading News Magazine • 2-12-14

Battery Acquires Data Physics to Consolidate Test-and-Measurement Market

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Battery Ventures has purchased a controlling stake in Data Physics Corp., a designer and manufacturer of test-and-measurement systems for noise and vibration applications. Battery Ventures intends to grow Data Physics both organically and through acquisitions.

“We are excited by the potential of Data Physics and the broader physical property test-and-measurement market, which is fragmented and ripe for consolidation,” said Jesse Feldman, a Battery general partner who is joining the company’s board. “Given Data Physics’ range of market-leading products, customer diversity and global brand, we feel the company can produce market-leading growth.”

Data Physics Corporation designs and manufactures test and measurement equipment and software for acoustic testing, machinery diagnostics, shock and drop testing, structural vibration testing, and shaker testing applications. The company offers signal analyzers, vibration control systems, shakers, amplifiers and accessories, underwater acoustics products, and post-contract support services. Data Physics serves customers in a range of industries including aerospace, defense, automotive, and electronics. Data Physics was co-founded in 1984 by Hewlett-Packard alumni Sri Welaratna and Dave Snyder. The company is based in San Jose, CA (www.dataphysics.com).

Upon closing on the acquisition, Battery has appointed Louis Pace, an industrial technology executive and former Battery executive in residence, as the new CEO of Data Physics and as a member of its board of directors. Mr. Pace was previously chief operating officer of HallStar, a specialty-chemical manufacturer, as well as vice president of business development at Belden, a manufacturer of signal-transmission equipment. He also served as president of Belden’s Specialty Products Division.

“Battery has developed deep domain expertise over the last decade building multi-hundred million dollar businesses in this market. I am thrilled by this opportunity to step into a leading operating role at a Battery company, and by the chance to work with the Data Physics management team and Co-Founder Sri Welaratna,” said Mr. Pace.

Battery invests in seed, early, growth and buyout opportunities in technology and related markets. Sectors of specific interest include software and services, web infrastructure, e-commerce, digital media and industrial technologies. The firm was founded in 1983 and is based in Boston with additional offices in Silicon Valley and Israel (www.battery.com).

Data Physics is the fifth active industrial-technology platform in the Battery portfolio, joining Drillinginfo, Industrial Safety Technologies, Nova Instruments and Nova Metrix. Battery is continuing to expand its investment activity in the industrial-technology markets and has completed more than 20 transactions to date across the US and Europe since 2003.
Early last year Battery closed on two new funds, Battery Ventures X at its $650 million target, and Battery Ventures X Side Fund at its $250 million target. The firm’s last fund, Battery Ventures IX with $750 million in capital commitments, closed in March 2010.

Monroe Capital (www.monroecap.com), a specialty finance company providing senior and junior debt and equity co-investments to middle-market companies, provided a senior secured credit facility to support Battery’s purchase of Data Physics. “We were pleased that Battery Ventures had the confidence in Monroe to provide a financing solution to support the purchase of a controlling stake in this leading-edge technology company,” said Ted Koenig, President & CEO of Monroe Capital. “This investment represents Monroe’s dedication and expertise within the technology space as we continue to expand our vertical.”

© 2014 PEPD • Private Equity’s Leading News Magazine • 2-12-14