Archives for April 2, 2015

Rotunda Capital Acquires Munch’s Supply

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Rotunda Capital Partners has acquired a majority stake in Munch’s Supply Co., a heating, ventilation, and air conditioning (HVAC) distributor operating in Chicago and Northwest Indiana.  Munch’s CEO Robert Munch, as well as the rest of the management team, will remain with company.

Munch’s Supply, operating seven branch locations in Chicago and Northwest Indiana with a combined 350,000 square feet of warehouse space, distributes heating and cooling supplies to area dealers and contractors. Munch’s Supply was founded in 1956 by founder Willard Munch and today is a third-generation family business. The company is headquartered southwest of Chicago in New Lenox, IL (www.munchsupply.com).

“Munch’s Supply has built a robust business over 60 years, driven by providing superior products and incredible service,” said Corey Whisner, a partner at Rotunda. “We are thrilled to partner with their existing team to help them reach their next level of growth through continued leadership in the greater Chicago market as well as expansion into new regions.”

 “As we evaluated our options for growing the company, it became clear that Rotunda was an ideal partner for us to assist our company in the next stage of expansion,” said Robert Munch. “The firm brings tremendous expertise in the distribution space, and we’ve outlined a strategy together that will allow us to aggressively expand to new regions while continuing to invest in our core Chicago market.”

Rotunda Capital invests in businesses with enterprise values of $5 million to $100 million. Sectors of interest include specialty finance, logistics and distribution, government and business services. Since founding in 2009, Rotunda Capital has completed eight platform investments and realized two exits. The firm has offices in Washington, DC and Chicago (www.rotundacapital.com).

“We see tremendous opportunities for Munch’s Supply to move into other markets through acquisitions of like-minded distributors in other regions,” said Dan Lipson, a partner at Rotunda. “Their culture of service, cultivated through 60 years of family ownership, will continue and offers a tremendous platform for growth, both in Chicago and elsewhere, and we look forward to working with Bob to accomplish his goals for the company.”

Livingstone Partners (www.livingstonepartners.com) served as the exclusive financial advisor to Munch’s Supply.

© 2015 PEPD • Private Equity’s Leading News Magazine • 4-2-15

Arsenal Acquires Chemical Innovations

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Royal Adhesives & Sealants, a portfolio company of Arsenal Capital Partners, has acquired Chemical Innovations Ltd. from the Vita Group.

Chemical Innovations Ltd. (CIL) is a developer and manufacturer of high performance rubber to metal, rubber to plastic, rubber to fabric and rubber to glass bonding adhesives for high performance automotive and industrial applications, including anti-vibration, hoses and belting and friction products.  CIL sells its products in over 50 countries through a network of over 40 distributors. The company is based northeast of Liverpool in Preston, UK (www.cilbond.com).

“We are excited to acquire a leader in a technology that complements and adds to our already broad line of adhesives and sealants,” said Ted Clark, Chief Executive Officer of Royal.  “CIL, like Royal, works closely with customers to provide adhesives solutions that enhance and add value to our customer’s products. We can help develop the global market though our global team of adhesives and sealants application professionals.”

Royal Adhesives and Sealants, acquired by Arsenal in November 2010, is a producer of proprietary, high-performance adhesives and sealants and other formulated products used in aerospace and defense, construction, personal care, graphic arts, specialty packaging, automotive and industrial applications.  The company is headquartered in South Bend, IN (www.royaladhesives.com).

Arsenal Capital Partners invests in middle-market specialty industrial and healthcare companies that have $50 million to $250 million in enterprise value.  Industries of specific interest include specialty & fine chemicals; segments of healthcare; transportation and logistics; power generation; aerospace & defense; and process industry components and services.  Arsenal has $1.7 billion of committed capital under management. The firm was founded in 2000 and has offices in New York and Shanghai (www.arsenalcapital.com).

© 2015 PEPD • Private Equity’s Leading News Magazine • 4-2-15

Bregal Acquires Obsession Archery

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Arcus Hunting, a portfolio company of Bregal Partners, has acquired Obsession Archery, a designer, marketer, and manufacturer of premium vertical bows.  Dennis and Angela Lewis, the founders of Obsession Archery, will continue to lead the company as President and Vice President, respectively, and also became equity holders of Arcus Hunting at closing.

“Obsession has developed best-in-class bows, validated by winning Editor’s Choice for best bow from Outdoor Life in 2014, due to its combination of speed and shootability,” said Scott Perekslis, Managing Partner and co-founder of Bregal Partners. “The company is growing rapidly, and the transaction will allow Dennis and Angela to focus on customer service and design while benefiting from the resources that the broader Arcus Hunting platform can bring to bear.”

The buy of Obsession Archery is the third add-on acquisition completed by Arcus Hunting since its formation in November 2014.  In January 2015, Arcus acquired Tinks, a maker of deer lures and attractants based near Atlanta in Covington, GA (www.tinks.com) and in November 2014 Arcus acquired Dead Down Wind, a scent control brand that mitigate a hunter’s scent while in the field, based in the Kansas City suburb of Pleasant Valley (www.deaddownwind.com).  Obsession Archery is headquartered near Macon in Jeffersonville, GA (www.obsessionbows.com).

Arcus Hunting was launched by Bregal to acquire a portfolio of brands in the bowhunting and archery category and is actively seeking additional add-on opportunities (www.arcushunting.com).

“With Dead Down Wind, Tinks, and now Obsession, we continue to pursue further strategic investments in leading hunting and archery brands, with a particular focus on categories that enhance hunters’ performance in the field,” said Mr. Perekslis.

Bregal Partners invests from $25 million to $75 million of equity in companies operating in the consumer, food & retail, energy services and healthcare industries. Target investments generate $15 million to $75 million or more of EBITDA. The firm has $500 million of committed capital funded by a sixth-generation family foundation with roots to 1841.  Bregal is the private equity investment business of COFRA Holding AG, a European holding company for a privately-owned group of companies which also include C&A, a clothing retail organization, and Redevco, a real estate company owning a portfolio of over €7 billion across 700 properties in Europe.  Bregal Partners is based in New York (www.bregalpartners.com).

© 2015 PEPD • Private Equity’s Leading News Magazine • 4-2-15

Divestitures Lead 2014 Restaurant M&A Transactions

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The J.H. Chapman Group, an investment bank specializing in mergers and acquisitions in the food and restaurant industries, has published its 2014 Chain Restaurant Merger & Acquisition Census.  This annual guide to acquisition activity in the retail foodservice industry, developed and analyzed by Chapman Principal David Epstein, provides unique perspectives on important restaurant industry trends.  A link to a free copy of the 2014 Chain Restaurant Merger & Acquisition Census is available at the end of this article.

The Census captured 107 announcements in 2014, a 10% increase from last year. “There were more corporate divestitures of franchisor stores and legacy brands than we have witnessed in prior years,” said Mr. Epstein. “Refranchising programs contributed more to the deal numbers than in any prior year and several once-core brands saw new owners.”

Major refranchising programs included transactions from Burger King, Taco Bell and Wendy’s. Transactions involving franchised units represented almost 52% of all non-public transactions. “Over the years we have seen a shifting emphasis on owned versus franchised mix. Presently, concept owners seem to favor a larger franchise strategy,” noted Mr. Epstein.  “Not surprising, 96% of all franchise store transactions involved franchisees within the same concept.”

Corporate boards took action this year in jettisoning several legacy brands. Carlson sold TGI Fridays to Sentinel Capital Partners and TriArtisan Capital Partners. Golden Gate Capital acquired Red Lobster from Darden in one of this year’s largest transaction. Other similar transactions included the Burger King Worldwide acquisition of Tim Horton, Checkers sale to Sentinel and the sale of Einstein Bros. Bagels to JAB Holding.

Eight initial public offering announcements were recorded after many years of contraction in the number of public restaurant chains. The IPO announcements included Bojangles, Dave & Busters, El Polo Loco, Habit Burger Grill, J. Alexander’s, Papa Murphy’s, Shake Shack, and Zoe’s Kitchen. Four secondary equity placements were announced by public restaurant companies with most of the funds targeted for concept expansion.

Private equity funds were involved in 22% of all transactions, down from 35% last year. Among the notable transactions not mentioned above are Victory Park Capital’s acquisition of Daphne’s, Berkshire Partners’ investment in Portillo’s, the Cerberus Capital Management purchase of troubled Fox & Hound, Apollo Global Management’s purchase of CEC Entertainment, Karp Reilly’s purchase of Patxi’s pizza and TPG Growth’s acquisition of PJ United.

Diversification among existing operators intensified with 19 transactions, representing 20% of all non-public transactions captured this year. “Lenders are back in the market encouraging their best customers to consider growth through acquisitions,” said Mr. Epstein. Some examples of this year’s announcements include Food Management Partners’ acquisitions of both Furr’s Fresh Buffet and Don Pablo’s; First Watch Restaurants’ purchase of The Good Egg; Delaware North’s purchase of Patina Restaurant Group; and Buffalo Wild Wings’ investment in nine-unit Rusty Taco.

“For 2015, we are predicting another growth year for restaurant chain M&A activity. Lenders are becoming more aggressive in both loan pricing and availability, which should translate into attractive prices for sellers. IPO transactions may give way to more secondary financings used to finance growth and equity restructuring.  As we noted last year, operators have responded to the Affordable Care Act by a combination of raising prices, reconfiguring menu items and reducing staff. We are still concerned about the effect of commodity costs on earnings, but note that operators have gained much more experience in reacting to large swings during the last two years,” concluded Mr. Epstein.

The Chain Restaurant Merger and Acquisition Census has been published since 1989 and reported on more than 2,800 changes of ownership transactions for chain restaurants in the United States. Restaurant chains qualify for the Census if either the acquirer or the target is headquartered in the United States and has at least four separate foodservice establishments of the same or different concept.  Qualifying candidates include quick service, fast casual, full service, food service management and cafeteria/buffet firms.

The J.H. Chapman Group is an investment banking firm that specializes in mergers and acquisitions in the food and restaurant industries. The firm has offices in Chicago and Paris (www.jhchapman.com).

For a free copy of the 2014 Chain Restaurant Merger & Acquisition Census click HERE.

© 2015 PEPD • Private Equity’s Leading News Magazine • 4-2-15

Monroe Backs BelHealth Buy of Precision Toxicology

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Monroe Capital was the sole lead arranger and administrative agent on a $14.5 million senior credit facility to support the recapitalization and growth of Precision Toxicology by BelHealth Investment Partners.

“We are pleased to partner with Monroe Capital on this transaction,” said Dave Sturek, Managing Director of BelHealth. “Their group is highly experienced in the healthcare industry and we look forward to working with them to help Precision Toxicology continue its strong growth trajectory and become a national competitor in the clinical diagnostic segment.”

Precision Toxicology is a clinical laboratory that specializes in providing quantitative drug testing, primarily for the purpose of helping physicians monitor their patients undergoing treatment for pain or substance abuse. Precision’s objective is to improve patient adherence and compliance with their prescription regimen and protect medical practices from liability. Precision Toxicology is headquartered in San Diego (www.precisiontoxicology.com).

BelHealth Investment Partners is a lower middle market healthcare focused private equity firm.  The firm invests from $20 million to $40 million in companies in four healthcare segments: services, distribution, products, and information technology. BelHealth is based in New York (www.belhealth.com)

Monroe Capital provides senior and junior debt and equity co-investments to middle-market companies. The firm was founded in 2004 and maintains offices in Chicago, Atlanta, Boston, Charlotte, Dallas, Los Angeles, New York and San Francisco (www.monroecap.com).

© 2015 PEPD • Private Equity’s Leading News Magazine • 4-2-15