Archives for September 8, 2017

Vance Street Buys RST from HKW

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Vance Street Capital has acquired R.S.T. Instruments from Hammond, Kennedy, Whitney & Company (HKW). Co-investing in the equity with Vance Street were Lexington Partners and Neuberger Berman Private Equity.

R.S.T. Instruments (RST), acquired by HKW in July 2014, designs and manufactures geotechnical instrumentation and data systems that are used to measure the structural integrity of bridges, hydroelectric dams, mines, railroads, airports, tailings dams, tunnels and highways. RST’s products are used to monitor, measure, log and transmit readings of geotechnical properties such as inclination, pressure, displacement and temperature so that customers can manage risks, increase productivity and reduce costs. RST, led by CEO Bruce Ripley, was founded in 1977 and is headquartered near Vancouver in Maple Ridge, BC (www.rstinstruments.com).

As part of the transaction, the RST management team will retain a material ownership stake in the business.  “We look forward to partnering with Vance Street to further expand our global presence and continue to enhance the breadth of product solutions we provide to our customers,” said Mr. Ripley. “Vance Street’s experience building precision manufacturing businesses through organic product innovation and sales channel management as well as strategic add-on acquisitions aligns well with our long-term growth objectives.”

“RST Instruments encompasses all of the traits we look for in highly-engineered manufacturing businesses,” said Brian Martin, Partner at Vance Street Capital. “RST is a best in class provider in a fragmented niche market, it has a strong management team with a proven track record of consistent growth and product innovation, and is well positioned in an industry with strong tailwinds. We are excited to partner with RST’s excellent management team and to further the business’ position as the premier global provider of geotechnical instrumentation through organic growth and acquisitions.”

Vance Street makes control investments in companies with enterprise values of $30 million to $200 million and EBITDA of $5 million to $20 million. Sectors of interest include aerospace, defense, industrial, and medical. The firm is based in Los Angeles (www.vancestreetcapital.com).

This acquisition of RST is the third platform investment for Vance Street’s second fund. In February 2016 the firm acquired A&E Medical Corporation, a medical device manufacturing company based south of New York in Farmingdale, NJ (www.aemedical.com); and in September 2016 the firm acquired Motion Dynamics, a maker of components used in the medical device, industrial and aerospace markets (www.motiondc.com).

Lexington Partners is an alternative investment manager primarily involved in providing liquidity to owners of private equity and other alternative investments and in making co-investments alongside private equity sponsors. The firm employs more than 90 people and has offices in New York, Boston, Menlo Park, London, and Hong Kong (www.lexingtonpartners.com).

Neuberger Berman, founded in 1939, is a private, independent, employee-owned investment manager. The firm manages equities, fixed income, private equity and hedge fund portfolios for institutions and advisors worldwide. Neuberger Berman managed $271 billion in client assets as of June 30, 2017. The firm has offices in 30 cities worldwide and is headquartered in New York (www.nb.com).

Hammond, Kennedy, Whitney & Company invests in companies with revenues between $20 million and $200 million and EBITDAs between $2 million and $20 million. Since 1982, HKW has completed 53 platform management buyouts of small middle-market companies throughout North America as well as 61 add-on acquisitions. The firm was founded in 1903 and is headquartered in Indianapolis with an additional office in New York (www.hkwinc.com).

Debt financing for the transaction was provided by BMO Capital Markets. Quarton International was the financial advisors to RST.

© 2017 Private Equity Professional | September 8, 2017

Investment Group Buys Tactical Cleaning

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Publicly-traded Strategic Environmental & Energy Resources (SEER) has completed the sale of its wholly-owned railcar cleaning division, Tactical Cleaning Company, to an investment group comprised of Rail Partners Management Group, Seneca Partners, and Uniprop.

The total consideration for Tactical Cleaning was $5 million as follows: $2.4 million of cash was paid at close; guaranteed payments totaling $1.1 million will be made over the next three years; and contingent payments of up to $1.5 million will be paid over the next three years based on the company’s operating performance.

Tactical Cleaning provides both fixed base and mobile railcar cleaning services to large and small rail car customers throughout North America. The company has locations in Denver, CO; El Dorado, KS; Danville, IL; Baltimore, MD; and Jersey Shore, PA. Under SEER ownership, Tactical Cleaning was headquartered in Denver but has been moved to Chicago.

“The Rail Partners team, in partnership with Seneca Partners and Uniprop, are very pleased that we were able to complete this transaction for Tactical,” said Tim Eklund of Rail Car Management. “Tactical and the Tactical team is a key piece of Rail Partners larger rail services platform strategy. We see tremendous opportunities to expand our relationships with existing Tactical customers and to develop new partnerships with rail car fleet owners throughout North America, both at our current locations, and at new Tactical locations on other rail-related acquisitions and investments we are pursuing.”

Rail Partners Management Group is a rail transportation investment, management and development company that acquires and invests across three rail industry segments: shortline/regional/industrial rail operations; rail-served transload/terminal/logistics operations; and rail equipment assets and services. The firm was founded by rail industry executives Tim Eklund, Craig Bargowski and Kevin Goins and has offices in Denver, Chicago and Springfield, MO.

“It was a pleasure to work with Rail Partners on what we expect will be the first of several rail industry focused transactions,” said Mike Skaff, Managing Director of Seneca. “Seneca is also pleased to expand its longstanding relationship with Uniprop and looks forward to growing Tactical at its existing fixed base locations and expanding its mobile presence.”

Seneca Partners is a middle market investment banking and private investing firm. Seneca makes majority or minority investments of $1 million to $20 million in US-based companies that have from $5 million to $100 million in revenue. Sectors of interest include manufacturing, healthcare and business services. The firm has offices in the Detroit suburb of Birmingham, MI and in Atlanta (www.senecapartners.com).

Uniprop is a family investment firm that focuses on real estate and private equity. The real estate portfolio consists of commercial and residential properties located in fourteen states. Private equity investments include portable storage container leasing, manufacturing companies for industrial parts and consumer goods. The firm was founded in 1974 by Paul Zlotoff and is headquartered in the Detroit suburb of Birmingham, MI (www.uniprop.com).

Strategic Environmental & Energy Resources provides waste management technologies and related services to companies primarily in the oil and gas, refining, landfill, food, beverage and agriculture, and renewable fuel industries in the United States and internationally. The company is based in Golden, CO (www.seer-corp.com).

© 2017 Private Equity Professional | September 8, 2017

Cove Hill Closes Fund I

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Cove Hill Partners, a newly formed private equity firm, has closed on its first private equity fund with over $1 billion of commitments. The new fund significantly exceeded its target. Limited partners include family offices, university endowments and charitable foundations. The founders and partners of Cove Hill have also committed significant equity to the new fund.

Cove Hill was founded by Andrew Balson, who previously spent 17 years at buyout firm Bain Capital. Mr. Balson’s founding team is led by Justin Roberts, Lara Moskowitz and Keith Power. Mr. Roberts, who is Managing Director and Co-Lead of Technology, has spent the last twelve years focused on technology investing at General Catalyst, THL Partners and TA Associates. Ms. Moskowitz serves as Chief Operating Officer, and previously held positions at General Atlantic and Solamere Capital. Mr. Power serves as Chief Financial Officer after twelve years at Summit Partners, and an earlier career at PwC.  Cove Hill remains active in recruiting additional investment and operating professionals.

“As we mark this important milestone, we are very grateful for the exceptional support we have had from a group of highly-aligned investors, who have shown confidence in our team and our investment approach. Their belief in our non-traditional, long duration investment structure will provide us the flexibility to be patient holders of our portfolio companies,” said Mr. Balson, who serves as Managing Partner. “We believe our deep industry experience and operating orientation will make Cove Hill a partner of choice for many founder-owners and exceptional management teams who are looking to accelerate growth, maximize performance, and realize their long-term objectives.”

Cove Hill invests in consumer and technology companies that have enterprise values between $100 million and $800 million. The firm intends to build a portfolio of 5 to 8 high companies and will focus on longer term investments with an average duration of eight or nine years, but, in some cases lasting as long as 15 years.

“Changes in technology are providing opportunities and challenges for many established companies,” said Mr. Roberts. “We look forward to working with our management partners to support them in navigating this rapidly changing landscape, building their businesses into market leaders, and creating equity value for themselves and their investors.”

Cove Hill is headquartered in Boston (www.covehillpartners.com).

© 2017 Private Equity Professional | September 8, 2017

Madison Capital Closes Latest CLO

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Madison Capital Funding, the middle market lending subsidiary of New York Life Insurance Company, has closed its seventh fund, MCF CLO VII LLC, a $302 million collateralized loan obligation (CLO) vehicle. The new fund will have a 4-year investment period and Madison Capital will serve as collateral manager.

Madison Capital is one of the more active lenders that support middle market private equity sponsors with cash-flow based lending facilities for acquisitions, recapitalizations, MBOs and LBOs. The firm will also provide equity co-investment capital of up to $2 million.  Sectors of interest include manufacturing, distribution, services, consumer products, healthcare, insurance & financial services, aerospace & defense, and technology services. Target companies typically have at least $3.5 million of EBITDA.

“This transaction represents our seventh middle market CLO to date and our third CLO transaction this year, with our 2017 CLO issuance approaching $1 billion,” said Managing Director & Head of Investment Management, Ashish Shah. “Investors place great value in Madison Capital’s strong loan originations capabilities, sophisticated credit management platform, and uninterrupted capital support from New York Life.”

Last month, Madison Capital provided financing to Quala, a provider of bulk transportation container cleaning and a portfolio company of Advent International, to support its August 2017 acquisition of Alpha Technical Services, an industrial and environmental services company owned by Rock Hill Capital Group.

Since its founding in 2001, Madison Capital has invested over $26.6 billion in net funded commitments in over 1,000 transactions and the firm manages over $8 billion in assets for New York Life and other third party clients. Madison Capital is based in Chicago (www.mcfllc.com).

© 2017 Private Equity Professional | September 8, 2017