Archives for October 25, 2016

Endowments and Foundations Increasing PE Exposure

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NEPC, one of the larger investment consulting firms to endowments and foundations, has published its Q3 2016 NEPC Endowment and Foundation Poll that measures endowment and foundation views on the economy, investing, and market trends. As with the Q3 Polls in 2014 and 2015, this survey focused on how endowments and foundations invest in and view private equity.

According to the survey, 43% of respondents are increasing their allocation to private equity and 53% are maintaining current exposure, with only 4% decreasing. As for which strategies are generating the most interest, investors are most attracted to Growth Equity (47%), Venture Capital (44%), and Buyouts (39%). This newfound attention is interesting because for the past two years, very few endowments and foundations expected private equity to generate higher returns (2014, 10%; 2015, 15%).

“After a year of strong performance, we’re not surprised to see endowments and foundations refocus their interest in private equity,” said Kristin Reynolds, Partner in NEPC’s Endowment & Foundation Practice Group. “We expect private equity will continue to attract assets as long as macroeconomic trends continue to drive lower expected returns in other classes. Given increased investor interest, it will be even more important to identify, vet, and select strong private equity managers.”

As for their outlook on private debt strategies, more than half of respondents (56%) are considering or have already invested in opportunistic credit, while 49% expressed the same view of distressed credit, and 39% for direct lending.

Click here for an infographic that highlights the survey’s primary findings

Valuations continue to be a top concern for private equity investors, however, with 56% of respondents citing it as their top concern, down slightly from the Q3 2015 survey (58%). Nearly a quarter (24%) think private equity generally is overvalued and 60% said current valuations will impact their future commitments. Investors’ second biggest concern with private equity was fund terms and fees (42%).

Other top findings include:

  • 67% are maintaining their exposure to fixed income; no respondents are increasing exposure.
  • US economic confidence is rising; 87% say the economy is in the same place or a better place than this time last year. This is a dramatic increase from Q2 2016 (50%).
  • Most see a slowdown in global growth as the greatest threat to near-term performance (63%).

The Q3 2016 NEPC survey was conducted online by the Endowment & Foundation Practice Group in September/October 2016.

NEPC has offices in Atlanta, Boston, Charlotte, Chicago, Detroit, Las Vegas and San Francisco, and services 118 endowment and foundation retainer relationships, representing assets of $57 billion as of June 30, 2016 (www.nepc.com).

© 2016 Private Equity Professional • 10-25-16

Rotunda Staffs Up

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Rotunda Capital Partners has added two professionals to its team with the hiring of Justin Potter and Rohit Dhake as Senior Associates. Mr. Potter will work out of the firm’s Washington, DC office and Mr. Dhake will work out of the firm’s Chicago office.

“We are excited to welcome Justin and Rohit to Rotunda Capital,” said John Fruehwirth, Managing Partner.  “Their addition will allow us to proactively source more deals within our core investment focus areas – value added distribution, specialty finance, asset-light logistics and business services.  In addition, they will provide additional operational assistance to our existing portfolio companies.”

Prior to joining Rotunda, Mr. Potter was a Senior Consultant at Ernst & Young where he provided strategic advice to financial services companies. His experience includes operating model assessment, systems integration, growth and profitability analysis, finance transformation, and project management. Mr. Potter earned his MBA from the University of Virginia and he has his undergraduate degree in Applied Economics from Cornell University.

Prior to joining Rotunda, Mr. Dhake worked at Prudential Capital Group where he focused on senior debt, subordinated debt, and private equity investment opportunities across a range of industries. He has his MBA from the University of Chicago and a BS degree in Finance and Accountancy from the University of Illinois.

Rotunda Capital invests in businesses with enterprise values of $15 million to $100 million. Sectors of interest include logistics, value-added distribution, specialty finance, and business services. Since founding in 2008, Rotunda has completed nine platform investments and realized three exits. The firm is headquartered in Bethesda, MD with an office in Northbrook, IL (www.rotundacapital.com).

“Rotunda is focused on building the pre-eminent independent sponsor in the lower middle market.  We need to continue to add top investment and operations talent to support all aspects of our business and ensure that we are well positioned to continue our success,” added Mr. Fruehwirth.

© 2016 Private Equity Professional • 10-25-16

Platinum Sells Mactac to LINTEC

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Platinum Equity has agreed to sell Mactac Americas to LINTEC Corporation in a transaction valued at approximately $375 million. Platinum acquired Mactac in November 2014 from Bemis Company for $170 million. In August 2016, Platinum sold Mactac’s European business to Avery Dennison for $218 million.

Mactac is a producer of pressure sensitive materials used in a range of industries including label printing, graphic design, packaging, digital imaging, retail display, fleet graphics, assembly engineering, automotive assembly, and medical device assembly. Mactac has operations in the United States, Canada and Mexico and is headquartered north of Akron in Stow, OH (www.mactac.com).

Mactac has experienced a significant turnaround in recent years under Platinum Equity ownership and adjusted EBITDA has grown more than 40% from 2014 to 2015.

“We partnered with Mactac President Ed LaForge and the company’s management team to transform Mactac by identifying and capitalizing on sustainable operational improvements while driving innovative new products and technologies,” said Platinum Equity Partner Louis Samson. “As a result, the company’s financial performance has been superb and the business is well positioned for continued growth and success.”

Mr. LaForge credited operational support from Platinum Equity and the strong commitment of Mactac’s employees for driving the turnaround. “We have achieved remarkable success thanks to a lot of hard work from our employees and a strong partnership with Platinum Equity,” said Mr. LaForge. “Working together, we implemented operational improvements throughout all areas of our business, invested in world-class manufacturing technologies, and just last year alone launched more than 40 new products.”

Platinum Equity invests in a range of industries including manufacturing, distribution, transportation and logistics, equipment rental, metals services, media and entertainment, technology, and telecommunications. The firm has completed nearly 175 acquisitions since its founding in 1995. Platinum is based in Beverly Hills with additional offices in New York and London (www.platinumequity.com).

LINTEC, the buyer of Mactac, is a manufacturer of adhesive-related products with operations in 15 countries around the world. The company is headquartered in Tokyo (www.lintec-global.com).

Moelis & Company (www.moelis.com) and Goldman, Sachs & Co. (www.goldmansachs.com) are serving as financial advisors to Platinum Equity. Latham and Watkins (www.lw.com) is serving as Platinum Equity’s legal counsel.

© 2016 Private Equity Professional • 10-25-16

Greenbriar Acquires Frauscher Sensor Technology

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Greenbriar Equity Group has acquired Frauscher Sensor Technology, a supplier of train tracking products used in the railway signaling industry, in partnership with the company’s management team, led by CEO Michael Thiel.

Frauscher designs and manufactures railway wheel detection and axle counting systems based on inductive and acoustic sensing technologies.  The company’s products are used by system integrators and railway operators to monitor track occupancy across railway networks, and are a core element of railway traffic management systems. Frauscher operates eight subsidiaries across five continents and its products are installed in over 50 countries worldwide. The company is headquartered near Salzburg in St. Marienkirchen, Austria (www.frauscher.com).

Greenbriar will support Frauscher’s expansion into North America, while continuing to support management’s other global strategies. The investment will also be used to accelerate the development of the new Frauscher Tracking Solutions system, which is based on distributed acoustic sensing technology.

“Frauscher has established itself as the clear technology and quality leader in the industry. We are excited to partner with Michael Thiel and his team and look forward to supporting the company during its next growth phase,” said Michael Weiss, Managing Director at Greenbriar. “We are particularly excited about Frauscher’s opportunities to leverage its differentiated product offering within new and existing geographic markets and develop innovative products.”

Greenbriar Equity Group invests from $50 million to $150 million per transaction in the global transportation industry, including companies in aerospace & defense, automotive, freight & passenger transport, logistics & distribution, and related sectors. The firm manages $2.5 billion of committed capital and is based in Rye, NY (www.greenbriarequity.com).

“This is an exciting time for the entire Frauscher organization. We are eager to work with Greenbriar as our new partner to continue to implement our growth strategy. Their extensive experience and relationships in the rail industry will be invaluable as we expand our presence in North America and introduce new technologies into the marketplace,” said Mr. Thiel.

© 2016 Private Equity Professional • 10-25-16

Warren Buys IPC Lydon

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Warren Equity Partners has acquired a majority interest in IPC Lydon (“IPCL”) from Jay Cashman Inc., a provider of civil and marine contracting services. The acquisition of IPCL is Warren Equity Partners’ third investment of 2016.

IPCL is a provider of maintenance, repair and upgrade services for mechanical systems and process equipment used in airports, distribution centers, power plants, co-generation plants, and wastewater treatment facilities.  The management team at IPCL, led by John Burke and Jim Lydon, has expertise in large-scale baggage handling system maintenance and installation, turbine maintenance, CHP (combined heat and power) plant design and installation, and power plant outage services. IPCL is based south of Boston in Avon, MA (www.ipclydon.com).

“We are tremendously excited to partner with an exceptional management team led by John and Jim, as well as Jay Cashman,” said Scott Bruckmann, Principal at Warren Equity. “IPCL fits directly into our thesis of investing in businesses that provide critical, recurring services to the industrial and infrastructure sectors. We think the Company has a long runway for growth, and we look forward to expanding the platform with management.”

Warren Equity Partners makes control and non-control investments of $5 million to $40 million in North American-based small and middle market companies that are active in the infrastructure, industrial, and building sectors.  The firm was founded by Steven Wacaster, a former partner at Pegasus Capital Advisors, and Henrik Dahlback, a former investment banker at Royal Bank of Canada. The firm is headquartered in Jacksonville Beach, FL (www.warrenequity.com).

Jay Cashman Inc. provides heavy civil and marine contracting services including construction, dredging, and windpower. The company is based south of Boston in Quincy, MA (www.jaycashman.com). Jay Cashman, the Chairman and owner of the company will retain a significant equity interest in the company in partnership with Warren Equity Partners.

“We chose to partner with Warren Equity due to their understanding of the industrial services sector and excitement about scaling the business,” said Mr. Cashman. “We look forward to capitalizing on their expertise and capabilities as we enter this next phase of growth and continue to expand our footprint.”

© 2016 Private Equity Professional • 10-25-16

McNally Invests in Avionics Maker

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McNally Capital has made an investment in Genesys Aerosystems, a provider of avionics systems for military and civil aircraft manufacturers and operators. Genesys’ existing management team will retain a majority interest in the company.

Genesys Aerosystems’ products include 3D Synthetic Vision Electronic Flight Instrument Systems, S-TEC Analog and Digital Autopilots, HeliSAS Helicopter Autopilot and Stability Augmentation System, as well as other sensors and components. The company offers its systems as stand-alone components or integrated to provide entire cockpit solutions. Genesys Aerosystems, led by President and CEO Roger Smith, is headquartered west of Dallas in Mineral Wells, TX (www.genesys-aerosystems.com).

“We have partnered with McNally Capital because of their tremendous expertise, track record of partnering with management teams to drive growth, and capital resources. We believe they are the best partners to help grow our business over the long term,” said Mr. Smith.

“We are excited to partner with the Genesys management team in support of their strategy to expand their offerings, build additional capabilities, and grow the business,” said Ward McNally, Managing Partner at McNally Capital. “Our partnership with the Genesys management team is consistent with our strategy of partnering with the owners and managers of high quality businesses to help them achieve their long term growth objectives.”

McNally Capital works with family offices to help them make and manage their investments in private companies and private equity funds. The firm also acts as a principal investor and can partner with high net worth family offices to invest in companies with EBITDA’s from $2 million to $25 million. Sectors of interest include industrials, food, packaging, distribution, logistics, consumer and healthcare. McNally Capital is based in Chicago (www.mcnallycapital.com).

“Genesys has established a leadership position within numerous avionics segments by developing innovative and customizable solutions that address critical customer needs. By continuing to invest in its offerings, Genesys is well positioned to expand its unique technologies and product portfolio,” added Brett Mitchell, a Principal at McNally Capital.

© 2016 Private Equity Professional • 10-25-16