Archives for 2014

Hicks, Riverside and Weinberg Acquire Intellifuse

by

H-D Advanced Manufacturing, formed by Hicks Equity Partners, The Riverside Company and Weinberg Capital Group to acquire and develop manufacturers of precision engineered components, has acquired Intellifuse Technologies.

Intellifuse is a manufacturer of carbide coated radial bearings, pads and other wear products.  The company’s products are used primarily by oil and gas companies in downhole drilling motors. Other industries served include mining and industrial.  Intellifuse is based in Houston (www.intellifusecoating.com).

Intellifuse is the sixth acquisition completed by H-D in the two years since its formation in December 2012, joining Overton Chicago Gear Corporation, a manufacturer of large, heavy duty gears and gearboxes; Innovative Mechanical Solutions (iMECH), a manufacturer of custom bearings for the downhole mud motor industry; Leading Edge Heat Treating Services, a provider of heat treating solutions; Sungear, a manufacturer of precision gears and assemblies for the aerospace industry; and Crown, a manufacturer of specialty components used in hydraulic actuation systems for commercial aircraft.

“Beyond serving existing market needs, Intellifuse’s high-tech coatings can benefit almost any steel wear component,” said Riverside Principal Rob Langley. “Wear components are also used extensively in mining, plastics, paper, food products and more. This is a compelling growth opportunity for H-D.”

The operations of Intellifuse will be combined with those of iMECH which was acquired by H-D in August 2013.  The addition of radial bearings to the H-D product portfolio is expected to complement the existing thrust bearings currently offered by iMECH.  Intellifuse’s co-founders, Mike Speckert and Majid Delpassand, will remain with the business. Mr. Speckert will be the Manager of US Operations for the combined iMECH and Intellifuse business, and Mr. Delpassand will serve as an advisor to the company.

H-D is actively seeking acquisition opportunities in aerospace components, gears and gearboxes, specialty bearings, and other heavy-duty, precision-engineered products.

“The addition of Intellifuse represents H-D’s commitment to providing the best products to its customers.  The leadership team has proven its ability to execute on strategic growth opportunities and we look forward to supporting Intellifuse with the financial and operational resources it needs to reach its goals,” said Tom Hicks, founder of Hicks Equity Partners.

Hicks Equity Partners is the private equity arm for Hicks Holdings, a holding company for the Thomas O. Hicks family’s assets. The firm invests in companies with enterprise values of less than $200 million and is based in Dallas (no website found).

The Riverside Company acquires businesses that have valuations of up to $250 million.  Since its founding in 1988, Riverside has invested in more than 340 transactions and the firm’s international portfolio includes more than 70 companies.  Riverside is headquartered in New York with additional offices in Atlanta, Chicago, Cleveland, Dallas, Los Angeles, San Francisco, and London (www.riversidecompany.com).

Weinberg Capital Group is a family office that specializes in acquiring middle-market companies that are based in North America and have annual revenues from $15 million to $100 million and EBITDAs ranging from $2 million to $10 million.  Sectors of interest include manufacturing, business services, medical and healthcare, aviation services, consumer products, and value-added distribution. Weinberg Capital Group is based in Cleveland (www.weinbergcap.com).

2014 PEPD • Private Equity’s Leading News Magazine • 12-10-14

Palladium Invests in Tire Retailer Raben

by

Palladium Equity Partners has made a significant investment, in partnership with the Raben family, in Raben Holdings, an independent tire dealer and automotive services provider.  The transaction is the fourth platform investment by Palladium in 2014.

Raben Tires supplies a range of tires – including passenger, motorcycle, and truck tires – to retail, commercial, and wholesale customers. The company was founded in 1952 by Butch Raben and has grown from a single location to 25 stores, two wholesale distribution centers, and three retreading facilities located in Indiana, Kentucky, Illinois, Missouri, and Arkansas.  Raben Tire is headquartered in Evansville, IN (www.rabentire.com).

“We are excited to partner with Palladium, a firm with strong experience in working with and growing family-owned companies,” said Tom Raben, President of Raben Tire. “Palladium shares our vision of expanding the Raben Tire footprint within our existing markets and into adjacent markets across the US. We are ready to work together to continue growing the company that my father, brothers, and I have built.”

“Raben Tire has established a strong brand reputation in the Midwest by offering excellent service to its loyal customer following and strong relationships with its suppliers,” said Luis Zaldivar, a Managing Director of Palladium. “My partners and I look forward to supporting the growth of Raben Tire through initiatives such as increasing the number of services offered, opening new locations, and pursuing strategic acquisitions. We seek to accelerate the consolidation of a fragmented industry by providing family-owned businesses with new liquidity and transition opportunities.”

Palladium targets investments in business services companies as well as in financial services, consumer/retail, food/restaurants, healthcare, industrial, and media businesses. Palladium has a focus on companies that operate in the US Hispanic market. In April 2014, Palladium announced the final closing of Palladium Equity Partners IV, LP with $1.1 billion of capital, significantly above the firm’s target.  Since its founding in 1997, Palladium has invested over $1 billion of capital in more than 20 platform investments and over 50 add-on acquisitions. The firm is based in New York (www.palladiumequity.com).

2014 PEPD • Private Equity’s Leading News Magazine • 12-10-14

Riverside Exits Screening Specialist DISA

by

The Riverside Company has sold DISA Global Solutions, a provider of drug and alcohol testing services. Riverside acquired DISA in January 2011.

DISA Global Solutions serves safety-sensitive and labor-intensive industries by providing services that include drug and alcohol testing, background screening, occupational medicine screening, and US Department of Transportation-related compliance services. The company’s largest customers are in the oil & gas and transportation industries. DISA is headquartered in Houston (www.disa.com).

“DISA’s outstanding leadership team shared our vision for the company,” said Riverside Partner Brian Sauer. “Together, we built on the company’s strong value proposition in safety for its customers and grew DISA into a global player meeting the needs of safety-sensitive industry customers around the world.”

During its hold period, Riverside worked with DISA’s management team to grow the company both organically and through add-on acquisitions.  Organically, DISA expanded its services offerings and added new customers and geographies throughout Riverside’s ownership.  Riverside completed six add-on acquisitions for DISA during the hold period including a UK company serving North Sea oil & gas customers and a provider of vehicle and driver compliance services, which expanded DISA’s reach and capabilities.

According to Riverside, a notable accomplishment during its hold period was DISA’s expansion internationally and into the transportation sector.  “DISA already had a strong position in the energy sector when we acquired the company,” said Riverside Managing Partner Loren Schlachet. “We worked with DISA’s leadership to build a larger and more capable company that served a broader array of customers in additional industries.”

In addition to adding customers in new and existing industries through add-ons, Riverside supported DISA’s growth within the energy sector. DISA was bolstered with investments in technology, management and sales and marketing capabilities. DISA grew dramatically in partnership with Riverside as the company rapidly added customers and captured cross-selling opportunities.   “DISA is a story of building an exceptional company on a very strong foundation,” said Mr. Sauer. “We are delighted with the results, and we leave DISA a bigger and better company than when we found it.”

Working with Mr. Schlachet and Mr. Sauer on the transaction for Riverside were Vice President Steve Rice, Associate James Zhang, Operating Partner Dan Colbert and Finance Director Tom Wrabel. Riverside Origination Principal Amy Margolis worked with the deal team to facilitate the sale of the business.

The Riverside Company acquires businesses that have valuations of up to $250 million.  Since its founding in 1988, Riverside has invested in more than 360 transactions and the firm’s international portfolio includes more than 75 companies.  Riverside is headquartered in New York with additional offices in Atlanta, Chicago, Cleveland, Dallas, Los Angeles, San Francisco, and London (www.riversidecompany.com).

Piper Jaffray, Houlihan Lokey, Deloitte and Jones Day advised Riverside on the transaction.

2014 PEPD • Private Equity’s Leading News Magazine • 12-10-14

Brentwood Closes Fund V

by

Brentwood Associates has held a final close for Brentwood Associates Private Equity V, LP. The fund closed with $688 million in total commitments, surpassing its $500 million target. Brentwood engaged UBS Securities as its placement agent for the fund.

Brentwood Associates is a consumer-focused private equity investment firm with over $1.2 billion of assets under management. Sectors of interest include specialty retail; branded consumer products; consumer services; direct marketing, including direct mail and e-commerce; education; health and wellness; and restaurants.  The firm is based in Los Angeles (www.brentwood.com).

Brentwood will continue to be managed by partners William Barnum, Anthony Choe, Roger Goddu, Steve Moore, Eric Reiter and Rahul Aggarwal, who was promoted to Partner in connection with the final close of Fund V.

Prior to the final close, the new fund completed investments in several consumer businesses, including Allen Edmonds, Lazy Dog Restaurants, Marshall Retail Group and Z Gallerie.

Brentwood’s prior fund, Brentwood Associates Private Equity IV, LP, closed with commitments of $439 million in 2006.

2014 PEPD • Private Equity’s Leading News Magazine • 12-10-14

Callisto Has First Close of Fourth Fund

by

Callisto Capital has held a first close for its fourth Fund, Callisto Capital IV, raising $188 million from Canadian investors. Callisto’s target for its new fund is $300 million and the final close is expected to occur sometime during 2015.

The first close investors include both returning institutional investors and individual investors, most of whom have been partners with Callisto for many years, including CEOs of both current and past portfolio companies.

“Raising this capital is a validation of our strategy,” said Joe Shlesinger, a Callisto Managing Director. “Our focus for this fund is much the same as it was in our previous funds, which is partnering with leading management teams to grow value in their businesses.”

Callisto Capital invests from $25 million to $50 million in equity capital per investment. The firm has an interest in many industries but has a specific interest in health care, retail and business services. Callisto Capital is headquartered in Toronto (www.callistocapital.ca).

“Mid-market private equity in Canada ideally suits our Bain & Company backgrounds, as we have a demonstrated track record of working productively with our portfolio companies and creating leading Canadian businesses,” said Larry Stevenson, a Callisto Managing Director.

2014 PEPD • Private Equity’s Leading News Magazine • 12-10-14

Wind Point Acquires Chemicals Business from Dow Chemical

by

Vertellus Specialties, a manufacturer of specialty chemicals and a portfolio company of Wind Point Partners, has agreed to acquire the assets of the sodium borohydride business of Dow Chemical.  This acquisition expands Vertellus’ product offerings to pharmaceutical, agrochemical, and industrial sectors, and boosts the company’s life science chemistry capabilities. The transaction is expected to close in the first quarter of 2015.

The Sodium Borohydride (SBH) business is a manufacturer of sodium borohydride used in the synthesis of fine chemicals such as pharmaceutical ingredients and agrochemicals. Sodium borohydride is predominantly used as a synthesis and process aid in the production of a variety of active pharmaceutical ingredients including high growth antiretrovirals for the treatment of HIV/AIDS.  It is also used in bleaching applications, such as mechanical wood pulping for newspaper and tissue production.

Vertellus Specialties manufactures specialty chemicals for the agriculture, nutrition, pharmaceutical and medical, personal care, plastics, coatings and industrial markets via two divisions: Agriculture & Nutrition and Specialty Materials.  Wind Point acquired Vertellus in December 2007 in partnership with CEO Rich Preziotti. Previously, Mr. Preziotti was Vice President and General Manager of Honeywell Chemical and Fluorine Products, a $1.2 billion manufacturer of performance, life science and fluorine chemicals. Vertellus is headquartered in Indianapolis (www.vertellus.com).

The acquisition of SBH accelerates Vertellus’ strategy to expand its product offerings in the life science sector through both organic growth and strategic acquisitions. Revenues from life science applications represent more than 65 percent of the company’s total revenue, and Vertellus expects this acquisition to increase its ability to service the pharmaceutical and agriculture sector.

“Vertellus is impressed with SBH’s market leading position in the supply of processing aids to fine chemical customers, specifically pharmaceutical and agrochemical manufacturers.  We are excited about the opportunity to serve the high growth synthesis segment from the SBH’s world class manufacturing facility in Elma, Washington,” said Mr. Preziotti.

“Completing strategic acquisitions is a key driver of our value creation plan, and with the SBH business as well as our recent acquisition of Pentagon Chemicals, we are successfully diversifying our portfolio with a focus on specialty chemicals, particularly in life sciences and high growth industrial markets,” said Alex Washington, a managing director at Wind Point Partners. “The SBH business is attractive and highly complementary to our existing portfolio of products, including processing aids such as Vitride® reducing agents for the fine chemicals industry.”

Wind Point Partners invests from $20 million to $70 million of equity in companies with revenues from $100 million to $500 million and EBITDAs of at least $8 million. Industries of interest include business services, consumer products, healthcare and industrial products. The firm has approximately $2.5 billion in capital under management and has completed more than 90 investments and 161 add-on acquisitions across its seven private equity funds. Wind Point Partners is based in Chicago (www.wppartners.com).

2014 PEPD • Private Equity’s Leading News Magazine • 12-9-14

American Capital Invests In Schulman Associates IRB

by

American Capital has made an investment in Schulman Associates IRB, an Institutional Review Board (IRB) that provides clinical trial oversight services to pharmaceutical firms, contract research organizations, hospitals and academic medical centers throughout the United States and Canada.  American Capital’s investment was made through American Capital Equity III, LP.

“We are extremely pleased to announce ACE III’s first platform investment since launching the fund earlier this year,” said Justin DuFour, American Capital Equity Partner.  “Schulman is an excellent example of the type of businesses we are targeting in ACE III – lower middle market companies with proven management teams, niche market leadership positions, stable recurring revenue streams and attractive growth potential.”

Schulman Associates IRB is one of the largest IRBs in the United States.  The company primarily serves the pharmaceutical and medical device industries as a central IRB on research involving drugs, medical devices and biologics.  Schulman reviews research protocols and consent documents from clinical trials to evaluate compliance with human subject protection regulations.  Schulman is fully accredited by the Association for the Accreditation of Human Research Protection Programs. The company was founded in 1983 and is based in Cincinnati (www.sairb.com).

“Over its 31 year history, Schulman has successfully grown into an industry leader in the protection of human subjects in clinical trials,” said Eugene Krichevsky, American Capital Equity Partner.  “With its best-in-class regulatory compliance record, extensive range of therapeutic expertise and differentiated technology platform, Schulman is poised to meet the growing IRB demand for complex, multi-site clinical trials.”

American Capital (NASDAQ: ACAS) is a publicly traded private equity firm and asset manager that originates, underwrites and manages investments of $10 million to $750 million in lower and middle market private equity, leveraged finance, real estate and structured products.  American Capital Equity III, LP is a $1.1 billion fund focused on acquiring control equity and equity-related positions in companies with $5 to $25 million of EBITDA.  Founded in 1986, American Capital has $80 billion in total assets under management and has eight offices in the US, Europe and Asia.  The firm is headquartered in Bethesda (www.AmericanCapital.com).

“We are very excited to partner with CEO Michael Woods and the rest of the Schulman team,” said Scott Kauffman, American Capital Equity Principal.  “They have done a remarkable job in driving significant historical growth and we are confident in their ability to continue to deliver strong results going forward.”

2014 PEPD • Private Equity’s Leading News Magazine • 12-9-14

Littlejohn Acquires PSC from Lindsay Goldberg

by

Littlejohn & Co. has acquired PSC Industrial Holdings, an industrial maintenance service provider, from Lindsay Goldberg which acquired the company in 2010.

PSC Industrial Holdings (formerly Philip Services Corporation) is a provider of industrial maintenance, cleaning and engineered services to the aerospace, automotive, manufacturing, oil and gas, power generation, refining and chemical, transportation, and utility industries. Services include hydroblasting, vacuuming, grit-blasting, explosive deslagging, chemical cleaning, process dewatering and routine maintenance.  The company was founded in 1977 and has over 2,000 employees and 90 locations across the US.  PSC is headquartered in Houston (www.pscnow.com).

“Under the leadership of Brad Clark and his management team, PSC has been transformed into a leading value-added service provider to the domestic energy industry.  We look forward to further building its service offering and geographic reach,” said Michael Kaplan, Managing Director of Littlejohn & Co.

Littlejohn & Co. makes control and non-control investments in middle-market companies that are undergoing a fundamental change in capital structure, strategy, operations or growth. Littlejohn invests in middle market companies with annual revenues typically between $100 million and $800 million, and generally invests $50 to $150 million of equity in its private equity investments.  The firm invests across a range of industries and acquires manufacturers, distributors, and service providers. Littlejohn is currently investing from Littlejohn Fund V which has over $2 billion in capital commitments. The firm is based in Greenwich, CT (www.littlejohnllc.com).

Lindsay Goldberg manages $10 billion of equity capital and is focused on partnering with family owned and entrepreneur‐led businesses seeking a partner to help actively build their businesses. The firm is based in New York (www.lindsaygoldbergllc.com).

Harris Williams & Co. was the exclusive financial advisor to PSC.  The transaction was led by Andrew Spitzer, Tiff Armstrong, Matt White, Chris Burnham and Ian Thomas of Harris Williams & Co.’s Energy & Power (E&P) Group.

“PSC represents a critical embedded solution for its customers throughout the energy infrastructure market,” said Drew Spitzer, a managing director in Harris Williams & Co.’s E&P Group. “Under Lindsay Goldberg’s ownership, PSC has achieved impressive organic growth and is well positioned to capitalize on favorable, long-term market dynamics. PSC has found a great partner in Littlejohn, and we look forward to the company’s continued success.”

“We are very excited to partner with Littlejohn & Co., whose successful track record of growing businesses with similar attributes will help us continue PSC’s transformation into the industry leader in safety, technology and service to our customers,” said Brad Clark, Chief Executive Officer of PSC.

2014 PEPD • Private Equity’s Leading News Magazine • 12-9-14               

Svoboda Capital Acquires Griffith

by

DataBank IMX, a portfolio company of Svoboda Capital Partners, has acquired Griffith, Inc. (DBA Alpha Systems). This transaction is the seventh add-on acquisition for DataBank since it was acquired by Svoboda in January 2011.

Alpha is a provider of electronic document management services that are used to improve revenue cycle operations in hospitals and other health systems. The company is headquartered just north of Philadelphia in Huntingdon Valley, PA (www.alpha-sys.com).

“The acquisition of Alpha Systems grows our presence in the Healthcare market and brings unique solutions and intellectual property we can leverage to better serve our Healthcare clients nationally,” said Chuck Bauer, Co-founder & CEO of DataBank.

DataBank is a service provider of outsourced imaging and information services, including document scanning, indexing, physical and electronic document storage, and software to manage information. The company operates a network of imaging production centers with locations in Maryland, Massachusetts, Connecticut, Indiana, Texas, Louisiana, Florida, California, Minnesota, Nebraska, and Pennsylvania.  Across this network, DataBank serves clients in several verticals, including healthcare, education, oil & gas, and government sectors.  The company also provides Shared Services (accounts payable processing, HR/pension records) across various industries.  DataBank is headquartered northeast of Washington, DC in Beltsville, MD (www.databankimx.com).

Alpha Systems will be merged into DataBank to become the company’s national healthcare division.  This division, combined with the existing DataBank healthcare business, will comprise 30% of overall DataBank revenue and will be led by the former owner and president of Alpha Systems, Scott Griffith.

Svoboda Capital Partners invests from $10 million to $20 million in business services, value-added distribution, and consumer products companies that have revenues from $10 million to $100 million and EBITDAs from $3 million to $15 million. The firm was founded in 1998 and has over $300 million of capital under management.  Svoboda Capital is based in Chicago (www.svoco.com).

2014 PEPD • Private Equity’s Leading News Magazine • 12-9-14

Genstar Adds On to Tecomet

by

Tecomet, a Genstar Capital portfolio company and precision contract manufacturer supporting the medical device and aerospace industries, has completed the acquisition of Symmetry Medical’s (NYSE: SMA) OEM Solutions business.

OEM Solutions manufactures surgical instruments, orthopedic implants, and plastic and metal sterilization cases and trays, selling its products to medical device OEMs.  OEM Solutions has over 450 customers, nearly 2,300 employees and 13 facilities in the US, the UK, Ireland, France and Malaysia.  The company is based west of Ft. Wayne in Warsaw, IN (www.symmetrymedical.com).

Tecomet, acquired by Genstar from Charlesbank Capital Partners in December 2013, is a contract manufacturing, engineering, and technology company specializing in net shape forging, precision machining, photochemical etching, surface texturing, vacuum brazing, laser and electron beam welding, and rapid prototyping. The company’s components and assemblies are used in the medical (with a special emphasis on orthopedic, trauma and spinal implants), aerospace & defense, commercial and industrial markets. Tecomet was founded in 1964 and is headquartered in Wilmington, MA (www.tecomet.com).

This acquisition creates the largest orthopedic contract manufacturer in the world with 18 facilities located in five countries on three continents. “With this acquisition, Tecomet adds to an already wide array of services and creates a footprint that would take decades to build organically,” said Bill Dow, Chief Executive Officer of Tecomet.

“This is a great opportunity to have a transforming impact on the orthopedic contract manufacturing industry. Original equipment manufacturers are moving more of their manufacturing out to contract manufacturers that can handle the volume and provide the systems support. This merger provides a contract manufacturing platform paramount to anything else in the orthopedic industry,” said Rob Rutledge, Principal of Genstar Capital.

Genstar Capital invests from $50 million to $400 million in middle-market companies that have enterprise values from $50 million to $1 billion and EBITDAs greater than $15 million.  Genstar manages approximately $3 billion of committed capital and targets investments in the industrial technology, financial services, software, and healthcare industries.  The firm was founded in 1988 and is based in San Francisco (www.gencap.com).

UBS Investment Bank acted as exclusive financial advisor and Weil, Gotshal & Manges acted as legal advisor to Tecomet in connection with the transaction.

2014 PEPD • Private Equity’s Leading News Magazine • 12-9-14

Cressey & Company Closes Fund 5 at Hard Cap

by

Cressey & Company has held a final close of Cressey & Company Fund V, LP at the fund’s hard cap of $615 million.  Fund V launched in July 2014 with a target of $400 million and was quickly oversubscribed.  Cressey & Company’s previous standalone fund, Cressey & Company Fund IV, closed in 2010 with $385 million in capital commitments.

The new fund will continue Cressey & Company’s focus on investing in provider, service and information technology businesses in the North American healthcare industry. The firm generally seeks control-oriented investments in companies with enterprise values at the time of investment of between $50 million and $300 million.  Similar to Fund IV, Fund V will implement Cressey & Company’s “Target, Partner and Build” strategy that focuses on providing capital and support to executives in high-potential sectors of the healthcare industry.

“We are pleased with the support our new fund has received,” said Peter Ehrich, Partner at Cressey & Company.  “The investment community’s response underscores the strength of our investment strategy and team.  We thank our existing and new investors for entrusting us with their capital, and we look forward to applying our expertise with the goal of building high quality healthcare businesses.”

Cressey & Company did not utilize a placement agent to raise the new fund.  Ropes & Gray served as the firm’s legal counsel.

Cressey & Company has offices in Chicago and Nashville (www.cresseyco.com).

2014 PEPD • Private Equity’s Leading News Magazine • 12-9-14

EY Bullish on 2015 PE

by

According to new study from EY, the dynamics that made 2014 a record year for US dealmaking will continue into the new year, pointing to ongoing buoyancy for the M&A market in 2015. US deal volume rose 5.1% in 2014, with 10,889 deals compared to 10,360 in 2013. Meanwhile, value soared to $1.6 trillion in 2014, up 40.7% from $1.1 trillion in 2013. This trend is likely to stay on course with 81% of executives expect the deal market to improve in the next 12 months, while 41% of US companies have five or more deals in their pipeline versus just 8% of companies six months ago.

US deal value was affected by a surge in high-profile megadeals. In 2014, 228 deals were worth between $1 billion and $10 billion, up 37.3% from 166 deals in 2013. Additionally, 21 deals were valued at $10 billion or more in 2014, up 75.0% from 12 such megadeals in 2013. On a global level, the United States was involved in nine of the 10 largest deals in 2014. Moreover, the US was the most targeted country in 2014, with 1,210 inbound deals worth $234.8 billion.

“2014 saw the US deal market get back to where it was headed prior to the sustained 2008 financial crisis,” said Rich Jeanneret, EY Americas Vice Chair, Transaction Advisory Services. “Based upon continued confidence and strong dynamics which include low interest rates, an improving economy, and robust corporate earnings, we expect deal growth to stay strong in 2015 and to draw out the middle market. Set against the global backdrop of post-crisis rebalancing and a divergence in performance across countries and industries, the US has proven to be ahead of the curve.”

Shareholder activism has had, and will continue to have, a significant impact on M&A. “More than ever, shareholder activists are keeping management on their toes,” said Mr. Jeanneret. “This fosters an environment where assets, brand and strategic vision are in a state of constant assessment. This environment bodes well not only for deal volume but also transaction type, and we expect to see greater levels of spinoffs, splits and carveouts over the next year.”

Spins, splits and carveouts pave the way for the next wave of M&A
Divestitures are in the spotlight, as companies undo past mergers and growth strategies that no longer fit with their core businesses. “Companies are trying to free up capital and are asking whether the sum of the parts is greater than the whole,” said Mr. Jeanneret. “Executives know that divesting as a strategic alternative is just as important to creating value as other transactions. This wave of spinoffs and splits will inevitably lead to additional M&A, predominantly in the middle market, as the spun-off businesses seek to bulk up or become acquisition targets themselves.”

Private equity’s pipeline: IPO’s at the forefront
Private equity exits, and IPOs in particular, took center stage this year, bringing the industry back into equilibrium. There were 409 US M&A exits in 2014, up 36.7% from 299 in 2013. Value spiked 50.7% to $154.7 billion in 2014 versus $102.6 billion in 2013. Meanwhile, 2014 saw 90 US IPOs of PE-backed companies, essentially flat from 2013, when 92 deals debuted. Value, however, nearly doubled, up 96.0% to $59.2 billion in 2014 from $30.2 billion in 20137. With the IPO pipeline robust, and assuming stock exchanges remain receptive, 2015 should exhibit a similar trend line.

Additionally, 2014 saw 772 PE acquisitions, up 6.3% from 726 in 2013. While volume increased, PE acquisition value dropped 21.0% to $100.7 billion this year, down from $127.5 billion in 2013. Average 2014 deal size was $381 million.

In terms of fundraising, 335 funds were raised in 2014, up from 323 funds in 2013. Fundraising value reached $247.8 billion in 2014, up 8.4% from $228.7 billion in 20138. Large funds accounted for 72% of fundraising this year. An increased level of dry powder, coupled with a continued accommodative financing environment, should translate into an increased level of buyouts in 2015.

Private equity investing activity has been relatively consistent across a number of industries, with highly visible activity in technology, energy and financial services. Over the past 10 years PE has graduated from a generalist model to a sector approach, focused on specific subsectors. North American funds are currently sitting on $260.2 billion of dry powder.

“As corporates continue to challenge their core business portfolio and actively carve-out non- performing businesses, PE will be an interested buyer, said Jeff Bunder, Global Private Equity Leader.

Private equity firms will target carve outs next year and will want a seat at the table as corporates decide whether to sell or spin. The challenge for PE firms will be finding deal opportunities and putting money to work as they face competition from their peers, as well as an increasing number of corporates coming into the market with conviction.

“Private equity is firing on all cylinders,” Mr. Bunder added. “Fundraising, investing, and exits have been robust in 2014, and in 2015 we expect these trends to continue. While the United States and Europe are attractive investment destinations for PE, the emerging markets remain a focus, and we expect to see an increase in invested capital in these markets as well as frontier geographies.”

“The environment is extremely conducive to dealmaking, and we expect the US M&A market to continue to be active in 2015,” Mr. Jeanneret concluded. “However, despite high transaction volumes and values, the current wave of M&A shows much more disciplined and rigorous analysis of deal opportunities than we have seen in past deal frenzies. Next year, big corporate deals will not disappear, but they will also open the door for a follow-on rush of smaller, middle-market transactions.”

2014 PEPD • Private Equity’s Leading News Magazine • 12-9-14

Gauge Adds Business Development Pro

by

After closing its debut private equity fund with $250 million in commitments in late September, Gauge Capital has hired Andrew Peix as a Principal and Director of Business Development.

“We are delighted to welcome Andrew to the team and look forward to utilizing his expertise as Gauge maintains and expands relationships with its partners in the investment banking and financial advisory communities,” said Tom McKelvey, Managing Partner of Gauge.

Mr. Peix has more than 11 years of experience in finance and private equity.  Prior to joining Gauge Capital, Mr. Peix was a Vice President with Serent Capital, where he led the transaction origination team and was responsible for managing relationships with investment banks, corporate sellers and other intermediaries.  He also spent time in transaction origination at Riverside Partners and in various roles at GE Capital.  Mr. Peix earned an MBA from Cornell University and a bachelor’s degree from Boston University.

Gauge Capital invests from $10 million to $40 million in North American based companies that have $5 million to $50 million of EBITDA. Sectors of interest include business and consumer services, healthcare services and food services. The firm will consider both majority and minority investments.

The new fund will make equity investments in eight to ten companies over the next several years.  Gauge has already closed on its first portfolio company with a $43 million investment in Origami Owl, a custom jewelry company that uses a direct sales business model (www.origamiowl.com).

Gauge Capital was co-founded in 2013 by Managing Partners Drew Johnson and Tom McKelvey, who each have over 20 years of experience as investors, operators, board members, and advisors, primarily in the middle market.  Gauge Capital is based near Dallas in Southlake, TX (www.gaugecapital.com).

2014 PEPD • Private Equity’s Leading News Magazine • 12-9-14

Nova Exits Coast Wire & Plastic Tech

by

Nova Capital Management has completed the sale of its portfolio company Coast Wire & Plastic Tech to Alpha Wire, an American manufacturer of wire and cable products.  Nova acquired Coast Wire in November 2012 as part of a portfolio of five industrial businesses previously owned by Latshaw Enterprises, a US based industrial holding company.

Coast Wire & Plastic Tech is a manufacturer of custom electronic wire and cable products for the medical, instrumentation and commercial electronic industries. The company is based south of Los Angeles in Carson, CA (www.coastwire.com).

“This exit comes ahead of schedule and has met expectations for all parties involved,” said Jan Kreminski, Nova’s Chicago-based Operating Partner. “It is in line with the portfolio strategy we envisaged at the time of the acquisition from Latshaw (Nova Capital Management Acquires Portfolio of Five US Industrial Businesses).  We continue to concentrate our resources on the remaining three companies in this portfolio, furthering their development and growth.”

According to Mr. Kreminski, the exit for Coast Wire demonstrates Nova’s specialized capabilities in maximizing investor returns through building and strengthening its acquired portfolio companies by focusing on building management teams, implementing growth strategies, and augmenting core competencies.  The result of this approach ultimately attracts a high level of strategic interest in Nova’s portfolio companies.

“Nova has been an excellent partner over the last three years and has invested substantially in our people, our infrastructure and our technology,” said Mark Vanderwoude, President & CEO of Coast Wire.

Nova specializes in acquiring multiple businesses in a single transaction. Since 2002, Nova has acquired or taken over the management of portfolios representing a total transactional value of over €1 billion.  The firm currently manages investments in over 25 businesses primarily operating in Western Europe, North America and Asia across a range of sectors. The firm is based in London with additional offices in Chicago and Toronto (www.nova-cap.com).

2014 PEPD • Private Equity’s Leading News Magazine • 12-5-14

KKR Invests in Arbor Pharmaceuticals

by

KKR has made a significant minority equity investment in Arbor Pharmaceuticals, a specialty pharmaceutical company.

Arbor Pharmaceuticals markets branded prescription products for the cardiovascular, hospital, and pediatric markets as well as generic products through its Wilshire division. The company has completed over twenty acquisition, licensing, or product development transactions over the past four years and has multiple products filed with the FDA as well as several branded and generic products in late-stage development. Arbor Pharmaceuticals has approximately 400 employees and is headquartered in Atlanta (www.arborpharma.com).

Arbor Pharmaceuticals was acquired by its current investor group in 2010.  Investors include Chief Executive Officer Ed Shutter; Signet Healthcare Partners; JW Asset Management, led by Jason Wild, Chairman of the Board of Arbor; and ARCH Healthcare Fund, led by Allen Chao.

“Arbor is led by an accomplished management team with a track record of building and scaling specialty pharmaceutical platforms. We believe that Arbor, with its diversified product portfolio, late-stage development pipeline, and proven business development acumen, is well positioned for continued growth,” said Ali Satvat, Director on KKR’s Health Care investing team.

KKR makes private equity, fixed income and other investments in companies in North America, Europe, Asia and the Middle East. The firm has $90 billion in assets under management. KKR was founded in 1976 and in addition to its New York headquarters the firm has offices in Menlo Park, San Francisco, Houston, Washington DC, London, Paris, Hong Kong, Tokyo, Beijing, Mumbai, Dubai and Sydney (www.kkr.com).

“We are pleased to be adding KKR, with its extensive industry experience, to our shareholder base. We selected KKR based on a number of factors, including compatibility with Arbor and a shared vision for achieving future growth. This is an important next step as we continue building a fully integrated pharmaceutical company focused on products that improve patients’ lives,” said Mr. Wild.

KKR has a history of investing in and growing health care companies, including Alliance Boots, Biomet, Gland Pharma, HCA, Jazz Pharmaceuticals, and PRA Health Sciences. KKR is funding the Arbor investment primarily from its North America XI private equity fund. The transaction is expected to close early in the first quarter of 2015.

Lazard Middle Market is serving as financial advisor to Arbor. 

2014 PEPD • Private Equity’s Leading News Magazine • 12-5-14

NewSpring Capital Invests in SpeedConnect

by

NewSpring Capital has led an $18 million mezzanine investment in SpeedConnect in partnership with Kemper Corporation, existing investors and management.

SpeedConnect will use the proceeds of the mezzanine investment to complete the acquisition of CommSpeed, an Arizona-based wireless Internet service provider, expand rollout of their LTE network and support other growth initiatives.  As part of the financing, Jim Vaughn, the former CEO of JAB Wireless, will join the company’s Board of Directors.

SpeedConnect is a wireless Internet service provider operating in over 50 communities and nine states; Michigan, Iowa, Illinois, Nebraska, South Dakota, Idaho, Montana, Texas and Arizona.  The company offers high-speed broadband Internet connections to residences and businesses using the U.S. Federal Communications Commission’s licensed radio spectrum in the 2.5 GHz (Band 41) spectral space. SpeedConnect, owned by Robert Liggett and John Ogren (CEO), was founded in 2001 and is headquartered in Frankenmuth, MI (www.speedconnect.com).

“Investments in the network and service are instrumental in our growth planning.  The strategies include an aggressive build out of the most advanced LTE network available,” said Mr. Ogren.  “LTE is the most efficient broadband technology and provides a smooth, continuous and rapid Internet user experience, so our  customers can browse the web, stream content, or download a movie at blazing-fast speeds.  I am very excited to be joined by NewSpring in helping to fund the next phase of SpeedConnect’s growth.  Their partnership approach to supporting the operational and financial growth of the Company will help to more quickly enhance our value.”

“We couldn’t be more excited to partner with John Ogren and his team at SpeedConnect,” said Anne Vazquez, NewSpring Principal.  “We’ve been impressed with their ability to grow to one of the largest providers of fixed wireless broadband in the country.  Under Mr. Ogren’s leadership, we look forward to SpeedConnect’s continued growth through delivering best-in-class broadband speeds and market-leading customer service.”

NewSpring Capital is a provider of private equity capital through a family of funds including NewSpring Ventures, NewSpring Health, and NewSpring Mezzanine.  NewSpring Mezzanine provides mezzanine capital for expansion stage and buy-out opportunities for Mid-Atlantic based companies that are active in the business services, health care, information technology, and specialty manufacturing sectors. The firm has offices in Radnor, PA; Short Hills, NJ; and Washington, DC (www.newspringcapital.com).

2014 PEPD • Private Equity’s Leading News Magazine • 12-5-14

Onex Increases Commitment to Onex Partners IV

by

Onex Corporation has increased its commitment to Onex Partners IV to $1.7 billion from $1.2 billion. This brings the total fund size to $5.7 billion with Onex continuing to be the largest investor. The increased commitment will apply to new Onex Partners IV investments completed after June 3, 2015, and will not change Onex’ ownership of businesses acquired prior to that date.

“We’re pleased with our pipeline of investment opportunities and the recently announced acquisitions for Onex Partners IV,” said Gerry Schwartz, Chairman and Chief Executive Officer of Onex. “We continue to believe we’re better positioned than ever for continued growth. We have a stable and experienced management team with the financial resources to capitalize on any opportunity.”

Last month, Onex agreed to acquire Switzerland-based SIG Combibloc Group (SIG) (www.sig.biz), the second largest provider of aseptic carton packaging globally, for up to €3.7 billion ($4.7 billion).  SIG provides beverage and food producers with aseptic carton sleeves and closures and filling machines that producers and packagers use with these sleeves.  Of the purchase price, €3.6 billion ($4.4 billion) will be paid at the closing of the transaction, with an additional amount of up to €175 million ($217 million) payable based on the financial performance of SIG in 2015 and 2016.  An equity investment of approximately $1.2 billion will be made by Onex Partners IV, certain limited partners as co-investors, including Onex, and SIG’s management team.  The transaction is anticipated to close in the first quarter of 2015.

Onex Corporation makes private equity investments through the Onex Partners and the ONCAP families of funds. Onex has more than $20 billion of assets under management and is based in Toronto with additional offices in New York and London.  Onex shares trade on the Toronto Stock Exchange under the stock symbol OCX (www.onex.com).

2014 PEPD • Private Equity’s Leading News Magazine • 12-5-14

American Capital Backs Snow Phipps Buy of Teasdale Foods

by

American Capital has invested $31.5 million in the form of a second lien term loan to support Snow Phipps’ acquisition of Teasdale Foods from Palladium Equity Partners.  Teasdale is a provider of private label and branded bean and hominy products to the retail, food service and wholesale channels.

“We were impressed with the responsiveness and dedication of American Capital’s Sponsor Finance Group,” said Sundip Murthy, who oversees consumer investing at Snow Phipps.  “They proved to be a reliable financing partner and we hope to collaborate on future investment opportunities.”

Teasdale Quality Foods is the largest producer and marketer of canned hominy and beans in the Western United States, primarily serving the Hispanic market under its Teasdale brand and other branded products such as Aunt Penny’s and Emilio’s. The company sells its products through the retail, foodservice, government and industrial channels, including grocery chains, distributors, club stores, dollar stores, restaurant chains, commissaries, Hispanic food manufacturers and the U.S government. Teasdale owns and operates manufacturing facilities in Atwater, CA (headquarters), Hoopeston, IL and Greeley, CO.  The company was founded in 1930 (www.teasdale.net).

“Teasdale is a recognized industry leader and the largest provider of both conventional store brand and organic store brand beans in the US, serving a large diversified customer base throughout the retail, foodservice and industrial channels,” said Ryan Brauns, American Capital Managing Director and Head of Sponsor Finance.  “This is our first time supporting a new Snow Phipps platform investment and we’re delighted to partner with them in this business.  Our Sponsor Finance Group continues to search for new opportunities to build relationships with private equity sponsors and support their new buyouts, refinancings, add-on acquisitions, dividend recapitalizations and growth opportunities.”

American Capital (NASDAQ: ACAS) is a publicly traded private equity firm and asset manager that originates, underwrites and manages investments of $10 million to $750 million in lower and middle market private equity, leveraged finance, real estate and structured products.  American Capital and its affiliated funds have invested approximately $12 billion in over 270 portfolio companies in support of private equity firms’ company buyouts, refinancings, add-on acquisitions, dividend recapitalizations and growth opportunities.  Founded in 1986, American Capital has $80 billion in total assets under management and has eight offices in the US, Europe and Asia.  The firm is headquartered in Bethesda (www.AmericanCapital.com).

GE Antares (www.geantares.com) served as administrative agent on a $104 million senior secured credit facility to support the Teasdale acquisition by Snow Phipps.

Snow Phipps makes control investments in companies primarily located in North America with enterprise values ranging from $100 million to $500 million that require equity investments ranging between $40 million and $100 million. The firm has $1.5 billion of assets under management and was co-founded by Ian Snow and Ogden Phipps in April 2005. Snow Phipps is headquartered in New York (www.snowphipps.com).

2014 PEPD • Private Equity’s Leading News Magazine • 12-5-14