Archives for May 8, 2014

Highlander Exits SensoryEffects

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Highlander Partners has sold its portfolio company, SensoryEffects, to Balchem Corporation, a publicly-traded human and animal health and wellness company, for $567 million.  According to Highlander Partners, the investment in SensoryEffects is the most successful one in the firm’s history.

SensoryEffects is a supplier of customized food and beverage ingredients and products. The company operates through three divisions: (1) SensoryEffects Powder Systems with locations in Ohio, Pennsylvania, Wisconsin and Minnesota; (2) SensoryEffects Flavor Systems located in Bridgeton, MO, and (3) SensoryEffects Cereal Systems located in Lincoln, NE. SensoryEffects is headquartered in St. Louis (www.sensoryeffects.com).

The sale of SensoryEffects to Balchem represents the culmination of eight years of collaboration and enterprise building between Highlander Partners and SensoryEffects’ founder, Chairman and CEO, Charles Nicolais, and the management team he assembled.

In 2005, Highlander decided to partner with SensoryEffects to consolidate and professionalize certain segments of the food ingredient manufacturing industry.  SensoryEffects first acquisition in the spring of 2006 was Diehl, a 125 year old family-owned business located in Defiance, OH, with revenues of approximately $15 million.  After eight years and twelve additional acquisitions, substantial organic growth, millions of dollars of capital expenditures and investment in human resources, SensoryEffects now has six manufacturing sites that in 2014 are expected to generate revenues of $260 million and EBITDA $53 million.

During the term of ownership, the relationship between SensoryEffects and Highlander Partners was highly collaborative.  While the day-to-day running of the business was always in the hands of management, there was constant interaction and communication between senior management and Highlander team members, particularly in the areas of acquisition strategy, tactics and negotiations; new product development projects; management recruiting; budgeting; development of key performance indicators; and overall business philosophy.

Highlander Partners makes investments in middle market businesses in targeted industries in which the principals of the firm have significant operating and investing experience. Sectors of interest include healthcare, basic manufacturing, food, and building materials. The firm has over $600 million in capital under management and is based in Dallas (www.highlander-partners.com).

Balchem Corporation (NASDAQ: BCPC) develops, manufactures, and sells specialty performance ingredients and products for the food, nutritional, feed, pharmaceutical, and medical sterilization industries in the United States and internationally. The company operates in three segments: Specialty Products; Food, Pharma & Nutrition; and Animal Nutrition & Health. Balchem is headquartered outside of New York City in New Hampton, NY (www.balchem.com).

© 2014 PEPD • Private Equity’s Leading News Magazine • 5-8-14

Graycliff Partners Acquires Ameritherm

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Graycliff Partners has acquired Ameritherm (DBA Ambrell), a designer and manufacturer of induction heating products and systems.  Exium Partners co-invested with Graycliff on this transaction.

“We are very excited to partner with Ambrell,” said Andrew Trigg, Managing Director, Graycliff Partners. “Ambrell provides proprietary heating products to a loyal global customer base and as a result has experienced 25 years of strong success. We see a great deal of growth opportunities for the company and look forward to partnering with management to continue to offer new products and to expand both in the US and internationally.”

Ambrell designs, manufactures, and markets induction heating products, which may be sold individually or as part of an Ambrell system-solution.  The company products are sold globally to energy, electronics, medical, and general industrial manufacturers.  Ambrell was founded in 1989 and is based near Rochester in Scottsville, NY and operates foreign subsidiaries in the United Kingdom, France and the Netherlands (www.ambrell.com).

“Graycliff’s success and deep experience in investing in the manufacturing industry appealed to us as we looked for the right partner to take Ambrell to the next stage of growth,” said Richard Rosenbloom, Chief Executive Officer, Ambrell. “We are excited to partner with their team, and we look forward to leveraging their expertise and proven investment approach to continue to grow the company and service our global clients.”

Graycliff Partners invests from $5 million to $25 million of equity and mezzanine capital in companies with revenues of at least $10 million and EBITDA margins of 10% or higher. Sectors of interest include manufacturing, services and distribution.  Both control and minority investments are considered. The firm was formed in December 2011 by the former investment team of HSBC Capital.  Graycliff Partners is headquartered in New York with an additional office in São Paulo (www.graycliffpartners.com).

“The Ambrell management team is experienced, committed, and guided by the same core values that we believe help build strong, sustainable businesses,” said Jeff Valentine, Partner, Exium Partners.

Exium Partners is an operationally-focused investment group that invests in companies with revenues of $5 million to $100 million and EBITDA of $2 million to $20 million. Sectors of interest include business services, software, digital media, manufacturing, telecommunications, and financial technology & services. Exium Partners is based near Rochester in Fairport, NY (www.exiumpartners.com).

© 2014 PEPD • Private Equity’s Leading News Magazine • 5-8-14

Teakwood Capital Sells ExamSoft to Spectrum

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ExamSoft, a provider of computer-based testing services and a portfolio company of Teakwood Capital, has been acquired by Spectrum Equity.  Daniel Muzquiz, Chief Executive Officer, and David Schnabel, President, as well as the rest of the senior management team of ExamSoft will continue to lead the company. Teakwood acquired ExamSoft in June 2010.

ExamSoft is a provider of computer-based testing software to academic institutions and professional certification entities.  ExamSoft is used by more than 550 clients, including an array of higher education institutions and 43 of the 50 US state bar examiners.  The company has offices in Dallas (headquarters) and Boca Raton (www.examsoft.com).

Teakwood Capital invests equity capital primarily in technology enabled business-to-business companies with revenues of less than $25 million and EBITDAs from $500,000 to $3 million. The firm focuses on management buyouts as well as control growth equity investments. Teakwood Capital was founded in 2005 and is based in Dallas (www.teakwoodcapital.com).

“Teakwood is proud of this investment and what ExamSoft’s talented management team has achieved. The team briskly grew revenues by expanding within its core markets while also developing new products to target large, adjacent markets,” said Shawn Kelly, Managing Director at Teakwood Capital. “ExamSoft is a great example of the operational and strategic value Teakwood delivers by working closely with a portfolio company team to jumpstart growth and achieve its true potential.”

The buyer of ExamSoft, Spectrum Equity, invests in growth companies in the information industry with particular interest in internet and digital media; communications, media and entertainment; and software and information. Spectrum Equity has raised $4.7 billion in capital across six funds. The firm was founded in 1994 and has offices in Boston and Menlo Park (www.spectrumequity.com).

“As technology and software continue to impact education, and as curricular design, testing and accreditation continue to shift in response to these changes, we believe market demand for assessment management solutions will continue to grow,” said Steve LeSieur, Principal of Spectrum Equity. “We view ExamSoft as a growth platform with exceptional management and technology that should scale considerably over the coming years as the company expands its portfolio of products and services offered to clients. We feel very fortunate to be partnered with Daniel, David and the entire ExamSoft team.”

Mid-market investment bank MHT MidSpan (www.mhtmidspan.com) acted as the exclusive financial advisor to ExamSoft in the transaction.

© 2014 PEPD • Private Equity’s Leading News Magazine • 5-8-14

OFS Closes Third Fund at $175 Million Hardcap

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OFS Energy Fund (OFS) has held a final closing of its third private equity fund (Fund III) which was well oversubscribed at its $175 million hard cap.  The new fund closed in less than 90 days from the start of fundraising.

As with the firm’s prior funds, Fund III will maintain the focus of acquiring and recapitalizing middle-market companies in the energy service industry.  OFS’ first fund (Fund I) had $47 million in commitments and was raised primarily from energy industry executives and closed in 2008 and has achieved in excess of four times cash-on-cash returns. The firm’s second fund (Fund II) has $90 million in commitments and is 80% deployed with six remaining platform companies and two other companies that sold for approximately four times cash-on-cash returns.

“We are very honored to have the opportunity to continue to work with sophisticated private and public institutional investors as well as our core of energy industry executives who have invested across Fund I to Fund III. We are also pleased to have our portfolio company CEOs from Fund I continue to invest in Fund II and Fund III reflecting their belief in our ability to find good company investments and add value as we work with our management teams to rapidly grow the underlying business,” said Bruce Ross, managing partner of OFS.

In addition to a number of energy industry executives who invested previously in the first two funds, Fund III has new limited partners including an Ivy League university endowment, a private pension plan for a Fortune 100 company, a private charitable endowment, multiple public pension plans and fund of funds investors.

The OFS’ team has significant experience in the energy service market, including direct executive operating responsibilities.  The entire operating team from OFS’ prior funds remains together to manage Fund III.  This includes Bruce Ross, Jerad McMayon, Scotty Reynolds, Ross Canion and Logan Kelley.

Two new members have joined the OFS team to help manage Fund III. Frank Schageman, former CFO of R360 Environmental Solutions, has joined OFS as an Operating Partner where he oversees portfolio company initiatives and assists the deal team in evaluating transaction opportunities.  Robert Whilden, former Executive Vice President of Continental Energy Services, has joined OFS as a Principal where he assists in identifying, evaluating and executing new investments as well as supports various portfolio company initiatives.

OFS specializes in acquiring and recapitalizing lower middle-market energy service companies with enterprise values between $5 million and $150 million.  Combining Fund II and Fund III, OFS now has $265 million of capital under management. OFS is based in Houston (www.ofsfund.com).

© 2014 PEPD • Private Equity’s Leading News Magazine • 5-8-14