Archives for February 16, 2016

DNS Capital Buys IMI

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DNS Capital has acquired IMI Holding Corp., the parent company of Industrial Magnetics, Prater Industries, and Sterling Controls, from River Associates.

IMI products are used in industrial production lines to remove metal; sort and size ingredients and particles; and manage product purity and quality control. The company’s customers are active in the food processing, industrial MRO, conveying, bulk material and aggregate handling and recycling sectors.  River Associates first invested in IMI in February 2012. IMI is headquartered in northern Michigan in Boyne City (www.magnetics.com) (www.praterindustries.com) (www.sterlingcontrols.com).

DNS Capital is a family office that manages the investment activities of Gigi Pritzker, her husband Michael Pucker, and their immediate family. The firm makes control and minority investments of $25 million to $100 million in companies with EBITDAs from $10 million to $50 million. DNS prefers companies that are active in basic industries such as industrials, business services, consumer, and real estate. The firm is headquartered in Chicago (www.dnscap.com).

“In the IMI team, we found true partners who we can be aligned with on a long-term basis,” said Michael Pucker, President and CEO of DNS Capital. “CEO Bud Shear and his team are first-class operators and we look forward to working with them to build upon the company’s long and distinguished history.”

River Associates, the seller of IMI, invests in companies with revenues of $20 million to $100 million and EBITDA of $3 million to $12 million.  Sectors of interest include niche manufacturing, high margin distribution and industrial services. The firm was founded in 1989 and to date has completed 75 investments, including platform and add-on acquisitions. River Associates is based in Chattanooga, TN (www.riverassociatesllc.com).

The investment banking group of Baird (www.rwbaird.com) was the financial adviser to IMI and River Associates and Miller & Martin (www.millermartin.com) provided legal counsel.

© 2016 Private Equity Professional • 2-16-16

Apollo to Acquire ADT

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The ADT Corporation has agreed to be acquired by Apollo Global Management at a transaction value of approximately $7 billion. Apollo will pay $42 per share of ADT, a premium of nearly 56% over ADT’s closing share price Friday of $26.87. ADT shares were up 53% to $41.20 in premarket trading Tuesday.

The merger agreement includes a 40-day go-shop period, during which ADT and its board of directors may actively solicit and enter into negotiations with parties that offer alternative proposals.

Upon closing of the transaction, Apollo will merge ADT with its current portfolio company, Protection 1, which it acquired in June 2015 from GTCR. GTCR acquired Protection 1 in 2010 in partnership with security industry veteran Tim Whall.

ADT provides electronic security, fire protection and other related alarm monitoring services to homes and small businesses in 35 countries. The company was founded in 1874 as American District Telegraph and was spun off as a publicly-traded company from Tyco International in 2012.  ADT has over 6.5 million customers and employs approximately 17,000 people at 200 locations. The company is led by Naren Gursahaney, its President and CEO, and had revenues in 2014 of approximately $3.4 billion. ADT is headquartered in Boca Raton (www.adt.com).

Like ADT, Protection 1 provides installation, maintenance and monitoring of security systems for homes and businesses. The company serves nearly 2 million customers and has 4,000 employees, five monitoring centers, and 70 office locations.  Protection 1 is led Tim Whall, President and CEO, and is headquartered southwest of Chicago in Romeoville, IL (www.protection1.com).

“We are tremendously excited by this unique opportunity to combine two premier businesses,” said Marc Becker, Senior Partner at Apollo. “This transaction provides the opportunity to dramatically enhance our position in the large, fragmented and growing residential and business interactive electronic monitoring industry.”

The merged company will be headquartered in Boca Raton and will largely operate under the ADT brand name. According to Apollo, the newly created company will have total annual revenue in excess of $4.2 billion.

Apollo has total assets under management of approximately $170 billion in private equity, credit and real estate funds invested across a core group of nine industries:  chemicals; commodities; consumer & retail; distribution & transportation; financial & business services; manufacturing & industrial; media, cable & leisure; packaging & materials; and satellite & wireless. The firm has offices in New York, Los Angeles, Houston, Chicago, Bethesda, Toronto, London, Frankfurt, Madrid, Luxembourg, Mumbai, Delhi, Singapore, Hong Kong and Shanghai (www.agm.com).

The transaction has fully committed financing in place and will be financed primarily through $1.6 billion of new first lien term loans, $3.1 billion in new second lien financing, the issuance of $750 million of preferred securities to Koch Equity Development (the investment and acquisition subsidiary of Koch Industries) and an equity contribution of approximately $4.5 billion from Apollo and co-investors.

Barclays, Citigroup Global Markets, Deutsche Bank, Royal Bank of Canada and PSP Investments are also providing financing for the transaction. BofA Merrill Lynch and Goldman Sachs are ADT’s financial advisers for the transaction and Barclays, Citigroup Global Markets, Deutsche Bank and RBC Capital Markets are advising Protection 1.

© 2016 Private Equity Professional • 2-16-16

Genstar Capital Acquires USA Fastener

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MW Industries, a maker of springs and specialty fasteners, has acquired USA Fastener Group. MW Industries is a portfolio company of Genstar Capital.

USA Fastener is a manufacturer of a wide variety of fasteners including both studs and nuts. The company also has machining capabilities such as computer numerically controlled (CNC) machining and milling, drilling, tapping, sawing, threading, and hot forging.  A variety of coating and plating services are also offered including polytetrafluoroethylene (PTFE – aka Teflon) coating, zinc plating, cad plating, hot-dipped and mechanical galvanizing. USA Fastener was founded in 2002 and is headquartered in Houston (www.usafgrp.com).

“The USA Fastener Group brand has an excellent reputation for quality, customer service, material flexibility, engineering expertise and on-time delivery,” said Bill Marcum, CEO of MW Industries. “The company’s products and workforce are highly complementary to our existing business base.”

MW Industries, acquired by Genstar in June 2011, is a provider of springs, specialty fasteners, machined parts and other precision components to more than 23,000 customers in 35 countries.  The company’s 40,000 SKUs are sold through a combination of direct sales, catalogs and distributors to original equipment manufacturers and aftermarket customers in the aerospace, medical, electronics, energy, agriculture/construction, automotive replacement and military sectors. MW Industries is based in the Chicago suburb of Rosemont (www.mw-ind.com).

Genstar, which had a final close in August 2015 of its seventh fund with $2 billion in commitments, 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 targets investments in the financial services, software, industrial technology, and healthcare industries.  The firm was founded in 1988 and is based in San Francisco (www.gencap.com).

© 2016 Private Equity Professional • 2-16-16

Abacus Closes First Deal with Sentinel

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Abacus Finance Group was the Syndication Agent and Joint Lead Arranger on senior secured credit facilities used in the January 2016 acquisition of Marketplace Events by Sentinel Capital Partners.

Marketplace Events organizes and operates consumer shows targeting the home improvement and enthusiast market including remodeling, home décor and gardening. The company’s show portfolio is comprised of 44 total events, including 29 US home and garden shows, 13 Canadian home and garden shows, and two holiday boutique shows. Marketplace Events employs 110 people across 12 offices and is led by Tom Baugh, Chief Executive Officer. The company is headquartered near Cleveland in Solon, OH (www.marketplaceevents.com).

“This was our first transaction with the Abacus team,” said Sentinel Partner Michael Fabian, “and they proved to be easy to work with. We were impressed by their efficient due diligence process coupled with the ability to give us a commitment quickly.”

Abacus provides cash flow senior financing to private equity-sponsored, lower-middle market companies that have EBITDA between $3 million and $15 million. Debt facilities can be as large as $50 million with a typical hold size ranging from $10 million to $30 million.  Abacus is an affiliate of New York Private Bank & Trust, the holding company for Emigrant Bank, founded in 1850.  Abacus is based in New York (www.abacusfinance.com).

“Because most of our equity sponsor relationships are longstanding, it is very exciting for us when we get the chance to work with a new partner,” said Tim Clifford, President and CEO of Abacus. “Like us, they target quality lower-middle market firms, so the fit is a good one. And, as Michael said, they appreciated our flexibility, speed, and ability to provide certainty of close – key aspects of what we call our Total Partnership Approach.”

Other Abacus team members involved in the transaction included vice president Eric Petersen and senior associate Jonathan Choa.

Sentinel Capital Partners invests in management buyouts, recapitalizations, corporate divestitures, and going-private transactions of businesses with EBITDAs up to $65 million. Sentinel targets eight industry sectors: aerospace & defense, business services, consumer, distribution, food & restaurants, franchising, healthcare services, and industrials. The firm is headquartered in New York (www.sentinelpartners.com).

Legal counsel was provided to Abacus by Goulston & Storrs (www.goulstonstorrs.com).

© 2016 Private Equity Professional • 2-16-16

Thoma Bravo Closes Lower Mid-Market Software Fund

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Thoma Bravo has completed fundraising for Thoma Bravo Discover Fund at the hard cap of $1.1 billion in capital commitments. The new fund invests in lower middle market software companies.

The Discover fund provides Thoma Bravo with an investment vehicle that can be used for opportunities that require less equity capital than the larger opportunities that the firm has historically pursued. For instance, Thoma Bravo’s most recent flagship fund, Fund XI, closed at $3.7 billion and began investing in 2014. In 2015, Fund XI was supplemented by the $1.1 billion Special Opportunities Fund II. Those funds have focused on companies at the upper end of the software middle market.

“Although earlier Thoma Bravo funds made many investments of the size targeted by the Discover Fund, the increasing scale of companies in the consolidating software and technology sectors has resulted in larger funds and larger investment sizes,” said partner A.J. Rohde, who is heading up the investment team for Discover. “The Discover Fund is intended to allow our firm to continue to partner with great management teams at smaller, growing companies that can benefit from our process and our deep experience in software.”

Discover has already made a portfolio investment with the acquisition in January 2016 of Infogix from H.I.G. Capital. Infogix provides an enterprise level data analysis platform that is used by large companies to monitor transactions, profitability and operational efficiency. Infogix is headquartered in the Chicago suburb of Naperville (www.infogix.com). “Infogix is the market leader in transaction controls monitoring and predictive analytics for enterprise customers across healthcare, financial services, media and communications, insurance, and other key verticals,” said Mr. Rohde.

Thoma Bravo provides equity and strategic support to management teams building growing companies. The firm originated the concept of industry consolidation investing, which seeks to create value through the strategic use of acquisitions to accelerate business growth.  Thoma Bravo is led by managing partners Seth Boro, Orlando Bravo, Scott Crabill, Lee Mitchell, Holden Spaht and Carl Thoma; as well as partners A.J. Rohde and Robert Sayle.

Thoma Bravo currently manages approximately $9 billion of equity capital and has offices in Chicago and San Francisco (www.thomabravo.com).

© 2016 Private Equity Professional • 2-16-16

Victory Park Gets New CIO

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Victory Park Capital has hired Upacala Mapatuna as the firm’s chief investment officer. Ms. Mapatuna will join Victory Park’s investment and management committees and be involved in overseeing the firm’s current and future investment funds.

“We have known Upacala for many years and are thrilled that she has chosen to join VPC’s leadership team. She is well-respected in our industry with proven investment acumen that will position us for continued success,” said Richard Levy, CEO and founder of VPC. “Upacala will be able to contribute immediately and we view her joining us as a validation of our investment strategy.”

Ms. Mapatuna spent the past 12 years at Goldman Sachs most recently as a managing director. Previously she held various positions in the investment industry including at Mill Road Capital, Warburg Pincus, and Lazard Capital Partners.  She began her career at the Board of Governors of the Federal Reserve and holds a bachelor’s degree from Williams College.

Victory Park invests from $10 million to $50 million per transaction in small cap public companies and middle market private companies that typically generate less than $150 million in revenue and less than $30 million of EBITDA. The firm focuses on complex investment situations. Victory Park was founded in 2007 and is based in Chicago with additional offices in Los Angeles, New York, San Francisco and London (www.victoryparkcapital.com).

© 2016 Private Equity Professional • 2-16-16