Archives for May 3, 2019

3M to Acquire Acelity

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A consortium of private equity investors composed of Apax Partners, Canada Pension Plan Investment Board (CPPIB) and Public Sector Pension Investment Board (PSP) has agreed to sell Acelity Inc. and its KCI subsidiaries to 3M at an enterprise value of approximately $6.7 billion. The EBITDA multiple for this transaction is shown below.

The three investors acquired Acelity through the November 2011 acquisition of publicly-traded Kinetic Concepts (KCI) $6.1 billion. The company was rebranded as Acelity in September 2014. The sale to 3M comes just two weeks after Acelity filed plans to go public for the third time in the company’s history.

Acelity designs, manufactures, markets and services therapies and products for the wound care and tissue regeneration markets. The company sells a range of products including KCI-branded negative pressure wound therapy, wound dressings, and negative pressure surgical incision management systems.

Acelity, led by CEO Andrew Eckert, has approximately 4,500 employees and is headquartered in San Antonio (www.acelity.com). Acelity had 2018 revenues of $1.5 billion. According to a statement from 3M, the enterprise value of this transaction equals 11x estimated annual adjusted EBITDA for the first 12 months following completion of the transaction, including expected run rate cost synergies.

During the ownership term, Apax, CPPIB and PSP worked with Acelity’s senior management team on organic growth strategies, including expansion of its sales force, and add-on acquisitions including the buy of UK-based Systagenix, a provider of wound care products, in July 2013; and the buy of Crawford Healthcare, also a provider of wound care products, in June 2018. In February 2017 the company sold its LifeCell business unit to Allergan for $2.9 billion and in November 2012 sold its Therapeutic Support Systems unit to Getinge AB for $275 million.

“We are proud of our close work with management to successfully transform KCI through a range of growth initiatives, including an M&A program, that enhanced the company’s strategic direction,” said Steven Dyson, chairman of the board of Acelity and a partner at Apax. “We believe the business will have a great future with 3M. Lastly, we are grateful for the opportunity to have joined in this highly successful investment with CPPIB and PSP, two long-standing investors in the Apax Funds.”

Leading the transaction CPPIB and PSP were Ryan Selwood, managing director and head of direct private equity at CPPIB, and Simon Marc, managing director and head of private equity at PSP.

At the closing of this transaction, expected in the second half of 2019, Acelity will become part of 3M’s Medical Solutions business which sells medical tapes, wound care dressings and products, sterilization products, and patient warming products.

“Acelity is a recognized leading provider of advanced wound care technologies and solutions and an excellent complement to our health care business,” said Mike Roman, 3M’s chief executive officer. “This acquisition bolsters our Medical Solutions business and supports our growth strategy to offer comprehensive advanced and surgical wound care solutions to improve outcomes and enhance the patient and provider experience.”

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

The Canada Pension Plan Investment Board (CPPIB) invests in public equities, private equities, real estate, inflation-linked bonds, infrastructure and fixed income instruments. Net assets under management in December 2018 were C$368 billion. CPPIB is headquartered in Toronto, with offices in London, Hong Kong, New York, Hong Kong, Sydney, Sao Paulo, Mumbai, and Luxembourg (www.cppib.ca).

PSP Investments is one of Canada’s largest pension investment managers with C$159 billion of net assets under management in September 2018. PSP manages pension investments for the Federal Public Service, the Canadian Forces, the Royal Canadian Mounted Police and the Reserve Force and has offices in Montreal, New York, Hong Kong and London (www.investpsp.com).

JP Morgan and Goldman Sachs are the financial advisors to Apax, CPPIB and PSP, and Credit Suisse is the financial advisor to 3M.

3M will finance the buy of Acelity with a combination of available cash and proceeds from the issuance of new debt.

© 2019 Private Equity Professional | May 3, 2019

Arlington Capital Adds to Tex Tech

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Tex Tech Industries, a portfolio company of Arlington Capital Partners, has acquired the coating and laminating operations and U.S. defense-related operations of Highland Industries.

The two acquired businesses will be renamed Tex Tech Coatings and will operate as a division of Tex Tech. Together, they will supply coated and laminated products to a variety of end markets including aerospace & defense, industrial, and medical. The division is headquartered in Kernersville, NC and will be led by its existing management team, including President Scott Burkhart, VP of Finance Kelly Moore, and Director of Coatings Sales Justin Barnett.

Tex Tech, led by CEO Ciaran Lynch, was founded in 1904 and is based in Portland, ME with manufacturing facilities in Maine, Thailand, and China. The company is a manufacturer of engineered textiles, specifically needle and woven felts. The company’s products include ballistic materials for soft body armor; fire blocking, thermal, and insulation used in aircraft; high-temperature filtration applications used in the power plant, cement, and asphalt industries; and tennis felt used in tennis balls (www.textechindustries.com).

“The acquisition of Tex Tech Coatings is an extremely exciting opportunity for the company and fits squarely into our strategic roadmap of adding high value-add manufacturing capabilities,” said Mr. Lynch.

Arlington Capital Partners (ACP) acquired Tex Tech from ShoreView Industries in August 2017. “We are extremely excited to begin our partnership with Scott and the entire Tex Tech Coatings team,” said Peter Manos, a managing partner at ACP. “Acquiring coating and laminating capabilities has been Tex Tech’s top priority since our initial investment as it allows the company to vertically integrate its manufacturing processes and become an end-to-end materials science supplier. We plan to continue to augment Tex Tech’s portfolio of capabilities through both organic investments and strategic acquisitions.”

ACP invests in buyouts and recapitalizations of companies valued from $50 million to $500 million. Sectors of interest include government services and technology; aerospace and defense; healthcare; and business services and software. ACP is investing out of its fourth fund which closed in July 2016 with $700 million of capital. The firm is based in Chevy Chase, MD (www.arlingtoncap.com).

“As an industry leader for decades, Tex Tech Coatings possesses proprietary and difficult-to-replicate manufacturing processes and entrenched customer relationships that span over 30 years,” said Erica Son, a vice president at ACP. “Going forward, we are very excited to enhance these strong customer relationships through the combination of Tex Tech’s world-class R&D capabilities and Tex Tech Coatings’ differentiated manufacturing processes and new development pipeline.”

Highland Industries is a manufacturer of textiles and composite materials used in the automotive, military, industrial, aerospace, and medical sectors. The company is owned by Key Safety Systems, a subsidiary of Chinese automotive conglomerate Ningbo Joyson Electronic. Key Safety Systems acquired Highland Industries in 2018 from global airbag manufacturer Takata through a bankruptcy proceeding. Highland Industries is headquartered in Greensboro, NC (www.highlandindustries.com).

© 2019 Private Equity Professional | May 3, 2019

Brown Brothers Buys 700 Valve

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BBH Capital Partners has acquired 700 Valve Supply, a master distributor of specialty industrial valves used in oil and gas refining, petrochemicals and power generation. 700 Valve’s previous ownership group has retained a significant stake in the business.

700 Valve stocks more than 40,000 valves including floating ball valves for high-pressure applications, nickel alloy valves for corrosive applications, bellow seal valves for emission control, low-temperature valve assemblies for cryogenic and refrigeration applications, and chrome materials for high-temperature applications. The company exclusively sells to topline distributors, which, in turn, sell to end users for maintenance, repair and operations usage.

700 Valve is the largest stocking distributor for OMB Valves and the exclusive distributor of Velan nickel alloy valves. The company, led by CEO Keith Southard, was founded in 2014 and is headquartered near Houston in Stafford, TX (www.700valvesupply.com).

BBH Capital Partners (BBHCP) makes control and non-control investments of $10 million to $125 million in North American-based companies with enterprise valuations between $10 million to $500 million. Sectors of interest include healthcare, technology, media and telecommunications, and business products and services. The group’s investments are structured as a combination of equity and subordinated debt. BBHCP is based in Boston. Click HERE for the BBHCP website.

“BBHCP represented the type of value-add partner we were seeking, and we are very excited with this outcome,” said Mr. Southard. “We look forward to working with BBHCP in continuing to grow 700 Valve, both organically and through acquisitions.”

The investment in 700 Valve was made through BBH Capital Partners Opportunities Fund LP (CP Opportunities Fund) which closed in April 2018 at its hard cap of $250 million.

“We are very excited about partnering with such an experienced management team on our first investment,” said Donald Hardie, a managing director of Brown Brothers Harriman and co-manager of the CP Opportunities Fund. “As the valve industry becomes more complex with a growing number of specialty SKUs, 700 Valve’s expertise and experience have proven to be invaluable for its customers.”

The CP Opportunities Fund invests up to $20 million per transaction and specifically targets lower middle-market US companies whose capital needs are below the minimum investment thresholds of BBH Capital Partners.

“We look forward to helping 700 Valve continue its growth trajectory, which has been quite impressive over the last several years,” said Jeffrey Price, a senior vice president of BBH and co-manager of CP Opportunities Fund.

KPMG Corporate Finance was the financial advisor to 700 Valve and its shareholders on this transaction.

© 2019 Private Equity Professional | May 3, 2019

Enlightenment Closes at Hard Cap

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Enlightenment Capital has held a hard cap close of its third fund with $250 million in capital commitments. The fund’s original target was $200 million.

Enlightenment Capital provides senior debt, mezzanine debt, and equity to middle market companies in the aerospace, defense, and government sectors. The firm was founded in 2012 and is headquartered in Chevy Chase, MD (www.enlightenment-cap.com).

“We greatly appreciate the investors who continue to support us, as well as the new investors who are partnering with us for the first time,” said Devin Talbott, managing partner and founder of Enlightenment Capital. “We are excited to continue working with best-in-class management teams and innovative companies that are looking to enhance their efforts with a strategic investment from our firm.”

Just last month, Enlightenment acquired Trowbridge & Trowbridge (www.tt-llc.com), a McLean, VA-based government contractor that provides information technology services including cloud deployment, cybersecurity architecture, next-generation modernization, application development, and network engineering. In January 2019 Enlightenment acquired System High Corporation (www.systemhigh.com), a Chantilly, VA-based provider of proactive protection, security engineering, counterintelligence, and cybersecurity services to government and commercial customers.

Metric Point Capital (www.metricpoint.com) was the placement agent for this fundraise, and Hogan Lovells (www.hoganlovells.com) served as legal counsel.

© 2019 Private Equity Professional | May 3, 2019