Archives for February 21, 2019

CDPQ Buys Stake in Allied Universal

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Paris-based private equity firm Wendel has agreed to sell approximately 40% of its equity stake, along with other existing shareholders, in Allied Universal, one of the largest providers of security services in North America, to Caisse de dépôt et placement du Québec (CDPQ). This transaction places an enterprise value of $7 billion on Allied Universal.

Following the transaction, Wendel will retain an 18% ownership stake in the company and CDPQ will become the largest shareholder of Allied Universal. Other equity owners of Allied Universal include Warburg Pincus and members of the company’s senior management team.

Allied Universal provides a mix of services including traditional manned guards, fire and life safety emergency preparation services, systems integration and remote monitoring, and janitorial services. The company has annual revenues of $7 billion and over 200,000 security professionals located at over 38,000 client sites.

Allied Universal has two headquarters facilities, one in Santa Ana, CA and the other near Philadelphia in Conshohocken, PA (www.aus.com).

In addition to the equity purchase transaction, Allied Universal has entered into an agreement with CDPQ for it to provide up to an additional $400 million of capital to support the company’s growth strategy and acquisition plans.

“This investment, which represents one of the largest private transactions in business services, enables us to invest in a national leader in facility and security services, a sector that will continue to experience sustained organic growth and industry consolidation,” said Stephane Etroy, executive vice president and head of private equity at CDPQ. “We look forward to supporting Allied Universal’s talented management team as they continue to grow this world-class business and build on its track record of providing its clients a customized mix of manned guarding and security technology solutions.”

Caisse de dépôt et placement du Québec is an institutional investor that manages funds primarily for public and para-public pension and insurance plans. As of June 30, 2018, it held C$308 billion in net assets (www.cdpq.com).

“CDPQ’s agreement to acquire a significant ownership stake and invest in Allied Universal is a strong endorsement of the company’s strategy and vision for the future and, most importantly, the incredible work of our entire team,” said Steve Jones, president and CEO of Allied Universal. “Wendel and Warburg are terrific partners who have supported our rapid growth over the past several years and we look forward to adding CDPQ to our shareholder base. We think CDPQ’s long-term approach is well-suited to our strategy for continued growth in manned guarding and technology services and look forward to working with them as partners.”

Wendel acquired Allied Universal (then AlliedBarton Security Services) in December 2015 for $1.7 billion. In August 2016, AlliedBarton merged with Universal Services of America, owned by Warburg Pincus, to create Allied Universal. In October 2018, Allied Universal acquired Roswell, GA-based US Security Associates (USSA), a portfolio company of Goldman Sachs Merchant Banking, for approximately $1 billion. USSA provides unarmed and armed uniformed security services, consulting and investigative services. Goldman Sachs Merchant Banking acquired USSA in July 2011 from Wind Point Partners.

Wendel traces its roots back to 1704 and is an active investor in European and North American-based companies across a range of industries. The firm is controlled by members of the Wendel family and is headquartered in Paris (www.wendelgroup.com).

“I am delighted to see that CDPQ, a high-quality investor, is joining us to further develop Allied Universal and strengthen its leading position in the industry,” said André François-Poncet, Wendel’s CEO. “This transaction also provides Wendel with further means to identify new high-quality assets and grow its portfolio over the long-term.”

Warburg Pincus has more than $44 billion in assets under management and has raised 16 private equity funds since its founding in 1966. The firm is headquartered in New York with offices in Amsterdam, Beijing, Hong Kong, London, Luxembourg, Mumbai, Mauritius, San Francisco, São Paulo, Shanghai and Singapore (www.warburgpincus.com).

Citigroup Global Markets was the financial advisor to CDPQ while Barclays and Morgan Stanley & Co. were the financial advisors to Allied Universal.

CDPQ’s investment in Allied Universal is expected to close in the third quarter of 2019.

© 2019 Private Equity Professional | February 21, 2019

GTCR Buys Back AssuredPartners

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Apax Partners’ eighth fund, Apax VIII LP, has agreed to sell its equity interest in AssuredPartners, a US insurance brokerage, to GTCR. GTCR previously owned AssuredPartners from its inception in 2011 until its sale to Apax VIII in October 2015. Apax is not completely exiting this investment as Apax IX LP, a $9 billion fund which closed in December 2016, will co-invest in the transaction alongside GTCR and have a significant minority stake in AssuredPartners.

AssuredPartners acquires and invests in insurance brokerage businesses (property and casualty, employee benefits, surety, and managing general agencies) across the United States and in the UK. From its founding in 2011, AssuredPartners has acquired hundreds of insurance brokerages and today is one of the largest insurance brokers in the United States with approximately $1.1 billion in annual revenue and more than 200 offices in 30 states. The company, led by CEO Jim Henderson and COO Tom Riley, is headquartered north of Orlando in Lake Mary, FL (www.assuredpartners.com). The AssuredPartners’ management team continues to hold a significant minority stake in the business.

“Apax has been a superb partner for Assured over the last three years and we are delighted to be renewing this successful partnership,” said Mr. Henderson. “At the same time, we are excited to welcome back the GTCR team who we know very well and value their expertise and insight. We look forward to working with both firms who share our vision and commitment to scaling the business further.”

GTCR formed AssuredPartners in July 2011, in partnership with Mr. Henderson and Mr. Riley, to consolidate the independent insurance brokerage industry and sold the company to Apax Partners in October 2015. Over the course of GTCR’s four-year ownership, the company completed 112 acquisitions and grew annual revenues to more than $500 million.

During Apax’s ownership (through Apax VIII), the company completed 124 acquisitions, added new senior executive positions including a chief information officer and chief organic growth officer, executed numerous operational improvements, and made investments in information technology, salesforce and infrastructure. The result of these initiatives has seen revenue and EBITDA more than double during Apax VIII’s ownership.

“Three and half years ago, we backed Jim Henderson and his team on an ambitious journey to build the preeminent US middle market insurance brokerage firm,” said Ashish Karandikar, a partner at Apax. “Since then, AssuredPartners has charted an impressive growth trajectory through organic investments in sales and technology and through acquisitions to create a scaled product and service proposition to carriers and customers. We believe there continues to be exceptional opportunities for AssuredPartners and it’s over 5,000 talented and entrepreneurial insurance professionals and are excited to be continuing our journey.”

“We had an incredible experience working with the Assured team and have watched with admiration their continued success over the last three years,” said Aaron Cohen, a GTCR managing director. “We are thrilled to be partners with Jim Henderson, Tom Riley and the team once again and look forward to the continued expansion of the AssuredPartners platform.”

GTCR pioneered the investment strategy of identifying and partnering with executives to acquire and build companies through a combination of acquisitions and internal growth. Sectors of interest include business services; technology, media & telecommunications; healthcare, and financial services & technology. Since its inception in 1980, GTCR has invested more than $15 billion in over 200 companies. The firm is based in Chicago (www.gtcr.com).

Apax invests in the technology and telecom; services; healthcare; and consumer sectors. The firm has offices in London, New York, São Paulo, Munich, Tel Aviv, Mumbai, Hong Kong and Shanghai (www.apax.com).

AssuredPartners and Apax VIII were advised by Bank of America Merrill Lynch and Kirkland & Ellis provided legal services. Harris Williams and Barclays also provided financial advice to Apax VIII. GTCR was advised by Morgan Stanley & Co. and Latham & Watkins provided legal services. Katten Muchin Rosenman was the legal advisor to the management team of AssuredPartners.

The transaction is expected to close in the second quarter of 2019.

© 2019 Private Equity Professional | February 21, 2019

Easy A’s and Killer B’s

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Headlined by a near-record valuation mark of 7.8x Trailing Twelve Months (TTM) Adjusted EBITDA, completed deal activity in the fourth quarter of 2018 showed that there is plenty of “oomph” remaining in this extended seller’s market, according to GF Data’s just-released February report.

Valuations averaged 7.2x for all of 2018, essentially in line with 7.3x in the prior year. Two hundred private equity groups and other deal sponsors reported to the data-tracking firm on 62 transactions closed in the fourth quarter in the $10 million to $250 million TEV range and at multiples of 3 to 15x Trailing Twelve Months Adjusted EBITDA.

“Last quarter we talked about ‘a bit of a soft landing’ in some market segments, yet double-digit multiples remain in force on $100-million-plus transactions and in selected industries,” said GF Data CEO Andrew Greenberg. “We think both dynamics may be at work at the same time — that valuations on “A” properties in “B” sectors may have eased, while “B” properties in “A” sectors continue to find new headroom.”

Senior and total debt multiples for the year both ticked down from record highs reached in 2017.  Leverage multiples for the year were 3.0x and 3.9x, respectively. “The year-end report lends even more support to the proposition that debt is being constrained by buyer capitalization decisions rather than debt availability,” said Graeme Frazier, IV, GF Data’s co-founder and principal.

“The percentage of deals completed with debt at or close to the maximum available crested at 42.3% of all deals in 2016.  The figure fell to 39.2% in 2017 and then to 31.3% in 2018,” added Mr. Frazier. “Meanwhile, the average debt loads for the deals that were completed at or close to maximum tolerance remained essentially unchanged at 4.4x in 2018, compared to 4.5x in 2017.”

“The latest GF Data report evidences that private equity activity has not lost much steam and that the industry remains highly competitive,” said Glenn Oken, managing director at Mangrove Equity Partners.  “Our firm has always placed a premium on assessing the operational dimension of lower middle market opportunities that are not everyone’s idea of squeaky clean perfection. Sustained elevated valuations have made this an even broader imperative in our industry.”

GF Data provides reliable external 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 200 private equity firms, mezzanine groups and other financial sponsors. Data contributors and other subscribers receive five 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; (4) quarterly industry drilldown reports; and (5) 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 610-616-4607.

GF Data is based near Philadelphia in Conshohocken, PA (www.gfdata.com).

© 2019 Private Equity Professional | February 21, 2019

TA Adds Vice President

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TA Associates has hired Amit Jain as a vice president. He will be part of the firm’s North America Technology Group and will be based in TA’s Menlo Park office.

Prior to joining TA, Mr. Jain was a senior associate with Marlin Equity Partners in the firm’s Los Angeles office. Earlier in his career, from 2013 to 2016, he was with TA as an associate in its North America Technology Group.

“It is a pleasure to welcome Amit back to TA,” said Jennifer Mulloy, a managing director at TA Associates and head of TA’s Menlo Park office. “Having been an integral part of the TA team for several years as an associate, Amit has demonstrated his ability to add value to TA’s growth private equity investment process, particularly in sourcing and analyzing new investment opportunities.”

Mr. Jain began his career at UBS where he was an analyst in the firm’s technology, media and telecommunications group from 2011 to 2013. He received his undergraduate degree in finance and management from the University of Virginia.

“We look forward to Amit’s continued involvement in further growing TA’s technology portfolio and in partnering with the management teams of our portfolio companies to build value and accelerate sustained growth,” said Brian Conway, chairman and managing partner at TA Associates.

TA Associates makes buyouts and minority recapitalizations of profitable growth companies in the technology, financial services, business services, healthcare, and consumer industries. Since founding in 1968, TA has invested in over 500 companies globally and has raised more than $24 billion in capital. The firm has offices in Boston, Menlo Park, London, Mumbai and Hong Kong (www.ta.com).

© 2019 Private Equity Professional | February 21, 2019