Archives for June 1, 2016

The First Quarter Lull: Tacking, Not Veering

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Completed deal activity in the GF Data private equity universe was light by any measure in the first quarter of 2016, according to the data tracking firm’s May 2016 report.

The 200 private equity groups and other deal sponsors that are active contributors reported 42 closed transactions in the $10 million to $250 million Total Enterprise Value (TEV) range.  Reported volume was 54 deals in the first quarter of last year and 66 in the fourth quarter of 2016. Total Enterprise Value/Trailing Twelve Months EBITDA averaged 6.7x for the quarter, in line with the 2015 average.

“Based on interactions with data contributors and other deal professionals, we continue to believe that this downturn represents a fundamentally sound market tacking rather than veering into a lull,” said GF Data CEO Andrew Greenberg. “While financial buyers were extremely active sellers in the accommodating market conditions of the past couple of years, individual and family business owners did not rush for the exits then.  We expect to see the remaining unsold inventory buoy deal volume in the balance of this year.”

GF Data provides information for use in valuing and assessing M&A transactions to private equity firms, investors, lenders and other users.  The firm collects and publishes proprietary transaction information from private equity groups on a blind and confidential basis.  The pool of active contributors comprises 204 private equity firms, mezzanine groups and other financial sponsors.

“Probably the defining dynamic in the market right now is valuation multiples surging on add-ons as opposed to platform investments.  The spread in favor of add-ons was 0.2x in the first quarter,” said B. Graeme Frazier, IV, GF Data’s Co-Founder and Principal. “This spread continues a reversal of the historical trend, and is a clear sign of both continuing debt availability and a “cost-averaging” frenzy, as larger firms come down market for less-expensive additions to highly priced platforms.”

“While our activity mirrors the GF Data report, we are experiencing an up-turn in owner discussions regarding the sale of their businesses. Buy-side engagements are gaining interest due to increasing competition for good companies,” said Michael Poole, founder of PCE Investment Bankers, a middle market financial services firm based in Winter Park, FL (www.pcecompanies.com).

GF Data’s contributors and 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 on 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.  GF Data is based in West Conshohocken, PA (www.gfdataresources.com).

© 2016 Private Equity Professional • Private Equity’s Leading News Magazine • 6-1-16

Arlington to Acquire Kreisler Manufacturing

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United Flexible, a portfolio company of Arlington Capital Partners, has agreed to acquire publicly traded Kreisler Manufacturing Corporation for $18 per share or approximately $33.6 million.

Kreisler (OTC: KRSL) is a manufacturer of precision metal components and assemblies used in commercial and military aircraft engines, and industrial gas turbines.  The company’s tubular products are primarily used to transport fluids, air, oil, and gas to various parts of the aircraft, aircraft engine, or turbine. Customers include large engine manufacturers such as General Electric, Rolls-Royce and Pratt & Whitney, as well as Tier-1 suppliers such as Parker Hannifin and Unison Industries. Kreisler is led by Michael Stern, President and Chief Executive Officer, and is headquartered north of Newark in Elmwood Park, NJ (www.kreisler-ind.com).

United Flexible designs and manufactures products that are used for the transfer of fluids and gases in extreme environments. Products include braided metal, fluoropolymer, polytetrafluoroethylene (PTFE – aka Teflon) and composite hoses, precision bellows, and expansion joints assemblies. The company sells its products to OEMs and distributors that are active in the aerospace & defense; satellite; power generation; general industrial; oil & gas; cooling; and transportation sectors. United Flexible has manufacturing operations near Chicago in Romeoville, IL (headquarters); Houston, TX; Merthyr Tydfil, UK (near Bristol); Stockholm, Sweden; and Rotterdam, The Netherlands (www.unitedflexible.com).

“We are excited about how well Kreisler fits our acquisition strategy of building one of the leading suppliers of high pressure and extreme temperature conduit systems,” said Peter Manos, a Managing Partner at Arlington Capital. The buy of Kreisler comes on the heels of United Flexible’s acquisition in February of Fulton Bellows, a Knoxville-based manufacturer of bellows and thin-walled metal components that are used in gas and fluid control systems (www.fultonbellows.com).

Arlington Capital has $1.5 billion of committed capital and invests in buyouts and recapitalizations of companies valued from $50 million to $500 million. Sectors of interest include government services and technology, aerospace & defense, healthcare, and business services & software. Arlington Capital is based in Chevy Chase, MD (www.arlingtoncap.com).

“In combination with Kreisler, United Flexible is positioned as one of the few Tier 1 suppliers that offer both fixed and flexible engineered assemblies for use in high pressure or extreme temperature applications,” said Jesse Liu, a Principal at Arlington Capital.

The transaction is expected to close before the end of June. At closing, Michael Stern, Kreisler’s President and Chief Executive Officer, will join United Flexible’s senior management team as President of Kreisler.

© 2016 Private Equity Professional • Private Equity’s Leading News Magazine • 6-1-16

Benford Buys Sensora

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ENMET, a portfolio company of Benford Capital Partners, has acquired Sensora Corporation, a maker of gas detection systems that are used in health, safety, industrial and defense applications. The company is headquartered in Bowling Green, KY.

ENMET was acquired by Benford as a platform in March 2015. The company is a manufacturer of gas detection equipment for the industrial, medical, and aerospace & defense markets.  Products range from compressed air line monitors to portable detectors and continuous multi-channel fixed systems that are used in hazardous gas conditions.  ENMET also custom engineers gas and vapor detection systems used in pipelines, ducts, process lines, storage tank headspaces, engine test cells, environmental chambers, vehicle maintenance areas and similar applications.  The company was founded in 1970 and is based near Detroit in Ann Arbor, MI (www.enmet.com).

ENMET is led by its president Norman Davis. He was hired by Benford Capital upon acquisition of the company last year. Mr. Davis was the former president of Microsensor Systems, a Bowling Green, KY-based developer of chemical sensing technology used to detect chemical warfare agents.

Benford Capital makes control investments in smaller, lower middle market companies that have revenues of at least $3 million and EBITDAs of at least $1 million.  Sectors of interest include niche manufacturers, unique service companies, and specialty distributors.  Benford Capital was founded in 2004 by Edward Benford and is based in Chicago (www.benfordcapital.com).

Benford Capital continues to actively seek add-on acquisitions of gas detection instrument and sensor manufacturers to expand or compliment the operations of ENMET.

© 2016 Private Equity Professional • Private Equity’s Leading News Magazine • 6-1-16

Windjammer Sells Infinite RF to Genstar

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Windjammer Capital Investors has sold Infinite RF, a distributor of electronic components and cable assemblies, to Genstar Capital.

Infinite RF is a multi-channel, business-to-business direct marketer of radio frequency, microwave and fiber optic connectors, adapters, cables, and cable assemblies. The company’s products, sold under the Pasternack and Fairview brand names, are used in electronic instrumentation; military and aerospace electronics, telecommunications equipment; medical, industrial and transportation equipment; as well as computers, peripherals, and office equipment. Infinite RF has more than 50,000 customers located in 75 countries. The company, led by CEO Terry Jarnigan, is headquartered in Irvine, CA with additional facilities in Allen, TX and Shanghai, China (www.infiniterf.com) (www.pasternack.com) (www.fairviewmicrowave.com) (www.pasternack.cn).

Windjammer acquired Pasternack Enterprises through its third fund in February 2008. In 2010, it acquired Fairview Microwave creating Infinite RF as a result of the combination. During Windjammer’s ownership period, revenues more than doubled as the company transitioned from a traditional catalog-based direct marketing business to a multi-channel and e-commerce focused specialty supplier.

“We congratulate Terry and his team on successfully building the company, both organically and through acquisition,” said Jeff Miehe, a Managing Director of Windjammer. “Infinite RF has grown significantly and evolved to become a stronger and more innovative organization as a result of management and Windjammer’s collaborative efforts.”

“Windjammer has been a great partner during a period of significant growth and transformation for Infinite RF,” said Mr. Jarnigan. “Their growth oriented approach, coupled with strategic, financial and operational resources helped us to elevate our performance, product offering and service levels, ultimately driving significant revenue growth.

Windjammer makes control investments of $50 million to $200 million in middle market businesses with EBITDAs from $10 million to $50 million. Sectors of interest include niche manufacturing, value-added distribution and business services.  Windjammer is currently investing from its $726 million Windjammer Senior Equity Fund IV, which closed in March of 2013.  The firm was founded in 1990 and is based in Newport Beach, CA and Waltham, MA (www.windjammercapital.com).

According to Genstar, which has an experience investing in the industrial technology sector, future growth at Infinite RF will come from increased research and development in the RF space as well as from positive trends in automation and the “internet of things”. Rob Rutledge, a Genstar managing director, led the transaction.

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 • Private Equity’s Leading News Magazine • 6-1-16

WCAS Buys APEX Emergency

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US Acute Care Solutions, a portfolio company of Welsh, Carson, Anderson & Stowe (WCAS), has acquired APEX Emergency Services, an emergency medicine group based in Denver.

WCAS and Emergency Medicine Physicians (EMP) – one of the largest physician-owned emergency medicine practices in the country – launched US Acute Care Solutions (USACS) in April 2015 to build a national provider of emergency medicine and hospitalist services. EMP’s medical group and practice management operations became the operational foundation for USACS.

At the launch of USACS, the company provided emergency care to over 2.7 million patients each year through 800 doctors and 300 practice providers at 64 hospitals in 15 states. Today, USACS has 120 locations in 22 states serving almost 4 million patients annually. The company is headquartered in Canton, OH (www.usacs.com).

The buy of APEX Emergency Services (APEX) is USACS’ fourth under WCAS ownership: Tampa Bay Emergency Physicians was acquired in December 2015. The group serves 200,000 patients annually through the Florida Hospital system in Tampa; MEP Health was acquired in November 2015. The group, based in Germantown, MD, serves 500,000 patients annually through eight facilities in Maryland (6), Massachusetts (1) and Connecticut (1); Emergency Physicians at Porter Hospitals was acquired in October 2015. The group treats more than 100,000 adult and pediatric patients in Denver.

The buy of APEX positions USACS to serve approximately 250,000 patients annually in 14 Colorado locations. “APEX is an outstanding group of clinicians who value physician ownership and management as the key to compassionate and efficient patient care,” said Dominic Bagnoli MD, CEO, USACS. “This partnership allows us to better serve both our hospital partners and community members.  We couldn’t be happier with the outcome.”

WCAS is focused exclusively on investments in business, information and healthcare services. Since its founding in 1979, WCAS has organized 16 limited partnerships with total capital of over $21 billion. The firm is based in New York (www.welshcarson.com).

Mid-market investment bank MHT MidSpan (www.mhtmidspan.com) was the financial advisor to USACS on this transaction. MHT MidSpan provides seller advisory, acquisition advisory, corporate finance and strategic advisory services to mid-market companies ($25 million to $500 million in enterprise value) in the business & information services; education; consumer; healthcare services and natural resources sectors. The firm has offices in Boston, Dallas, Houston and San Francisco (www.mhtmidspan.com).

© 2016 Private Equity Professional • Private Equity’s Leading News Magazine • 6-1-16