Archives for August 2019

Arlington Sells Ontario Systems to New Mountain

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Arlington Capital Partners has agreed to sell Ontario Systems to New Mountain Capital.

Ontario Systems is a provider of enterprise software that is used for accounts receivable management in the healthcare, accounts receivable management (ARM), and government sectors. The company’s software platforms include the Artiva family of products, FACS, TCS, RevQ, and Ontario Omni. In the government sector, Ontario Systems’ software portfolio includes FullCourt Enterprise which is used by state and local governments to manage court cases, process online payments, and automate revenue recovery processes.

Ontario Systems’ customers include more than 600 hospitals – including five of the 15 largest hospital networks, eight of the 10 largest ARM companies, and more than 600 federal, state, and municipal governments. Together, the company’s customers handle more than $170 billion in payments annually. Ontario Systems was founded in 1980 and has nearly 500 employees in 28 states with a headquarters in Muncie, IN, and additional offices in Vancouver, WA, and Albuquerque, NM (www.ontariosystems.com).

Under Arlington Capital’s ownership, the company has achieved record revenues and profitability. “Our relationship with Arlington Capital Partners has been outstanding,” said Ron Fauquher, CEO and co-founder of Ontario Systems. “With Arlington’s assistance, we have successfully expanded our healthcare-market footprint, entered government markets, doubled our revenues, and expanded our reach to include more than 1,200 clients. We are proud of our progress and achievement of the goals we had previously set, and we thank Arlington for their support in helping drive our strategic growth initiatives. As we take the next evolutionary step, we look forward to New Mountain Capital’s support and partnership.”

“Arlington’s investment in Ontario Systems continues our track record of successful partnership with founding management teams to drive transformational growth in healthcare software companies,” said Matt Altman, a managing partner at Arlington Capital. “The investments in technology and people that we have made over the course of our investment have further distinguished Ontario as the leader in revenue cycle management enterprise software across the large and growing healthcare, government, and accounts receivable management markets.”

“Ontario exemplifies New Mountain’s longstanding investment thesis of backing best-of-breed solution providers addressing critical pain points in revenue recovery and workflow management,” said Matt Holt, managing director and deputy head of private equity at New Mountain Capital. “We look forward to supporting Ontario’s continued growth by identifying both organic and inorganic initiatives to help the company realize its full potential.”

New Mountain is an industry generalist and seeks to acquire just three or four companies each year, typically in the $100 million to $1 billion enterprise value range, and generally invests $100 million to $500 million per transaction. In September 2017, New Mountain held an oversubscribed final close of its fifth private equity fund, New Mountain Partners V LP. The new fund closed at its hard cap with just over $6.1 billion of capital commitments. The firm was founded in 1999 and is headquartered in New York (www.newmountaincapital.com).

Arlington Capital, the seller of Ontario Systems, was founded in 1999 and has completed over 90 acquisitions since its inception. The Chevy Chase, MD-based firm is currently investing out of Arlington Capital Partners V LP, a $1.7 billion fund which closed in June 2019 (www.arlingtoncap.com).

This transaction is expected to close by the end of August.

© 2019 Private Equity Professional | August 23, 2019

TSG Buys Joe Hudson’s from Carousel

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TSG Consumer Partners has agreed to acquire a majority stake in Joe Hudson’s Collision Centers (JHCC) from Carousel Capital. Post-closing, Carousel Capital and JHCC management will continue as minority investors.

JHCC is an operator of more than 100 auto body repair shops across the Southeastern region of the United States including Alabama (30), Florida (28), Georgia (6), Kentucky (2), Mississippi (5), North Carolina (7), Tennessee (3), Texas (16) and Virginia (5). The company’s first repair shop was opened in 1989 in Montgomery, AL by founder Joe Hudson. JHCC provides its customers with a real-time web-based repair tracking system that allows them to monitor the status of their repairs 24 hours a day, 7 days a week. JHCC is headquartered near Montgomery in Pike Road, AL (www.jhcc.com).

Carousel Capital acquired JHCC in October 2014. At that time the company operated 23 stores in Alabama, Florida and Georgia. The company’s store growth was accomplished through both organic growth and add-on acquisitions including the recent buys of Stallings Collision Centers, a Virginia-based based operator of 11 collision repair centers in August 2019; St. Matthews Imports, a Kentucky-based operator of two collision repair centers in May 2019; and Car Guys Collision Repair, a Florida-based operator of 13 collision repair centers in July 2018.

“JHCC’s longstanding reputation for providing customers with exceptional service has enabled it to grow into one of the leading regional players in the collision repair industry,” said Pierre LeComte, managing director at TSG. “We are thrilled to join forces with JHCC CEO Traweek Dickson and the management team as the company looks to capitalize on a number of compelling growth opportunities, including increasing its geographic footprint and expanding in its existing and adjacent markets.”

San Francisco-based TSG invests from $200 million to $800 million of equity in high-growth, branded consumer companies. Sectors of specific interest include beauty, fitness and outdoor, food and beverage, personal care, household, lifestyle, pet, restaurant, and retail. In January 2019, the firm closed its eighth fund with an oversubscribed $4 billion of limited partner capital commitments (www.tsgconsumer.com).

Carousel Capital, the seller of JHCC, invests in business, consumer and healthcare services companies that are headquartered in the Southeastern United States and have enterprise values of up to $200 million and EBITDA of at least $3 million. The firm, based in Charlotte, was founded in 1996 and is led by managing partners Charles Grigg and Jason Schmidly (www.carouselcapital.com).

Interested readers can access two 2018 reports on the collision repair industry from Body Shop Business magazine and from Focus Investment Banking.

Harris Williams was the financial advisor to Carousel Capital and JHCC on this transaction which is expected to close in the third quarter.

© 2019 Private Equity Professional | August 23, 2019

EW Healthcare Closes New Fund

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EW Healthcare Partners (EWHP) has held a final close of EW Healthcare Partners Fund 2 LP (Fund 2) with $745 million of capital. The new fund closed above its $650 million target.

Fund 2 will make minority or majority investments in US or Europe-based commercial-stage healthcare companies in the pharmaceutical, medical device, diagnostics, and technology-enabled services sectors.

“We are primarily looking for middle-market companies that have revenues of $20 million to $200 million and the potential to grow at around a 20% annual revenue growth rate for several years,” said Petri Vainio, managing director and chairman of EWHP’s executive committee. “We believe our healthcare expertise and team of experienced operating partners and senior advisors provide us with the platform to attract and add value to the types of healthcare companies that Fund 2 is targeting.”

“Our approach is hands-on, long-term oriented, highly collaborative and focused on value creation,” said Marty Sutter, co-founder and chairman of EWHP’s investment committee. “Our earlier fund successfully invested in several promising healthcare companies, and we look forward to endeavoring to build another portfolio of successful healthcare companies in Fund 2. Our goal is to provide capital that can drive revenue growth by expanding a sales force, expanding the geographic territory or countries where the products are sold, acquiring complementary products or companies, and/or developing and launching new products.”

Since its founding in 1985, EWHP (originally called Essex Woodlands) has raised just less than $4 billion in capital and invested in more than 150 healthcare companies. EWHP’s earlier fund, Essex Woodlands Fund IX LP, closed in October 2016 at $543 million. The firm’s team is made up of 20 senior investment professionals and 10 experienced healthcare executives. EWHP has offices in Palo Alto, Houston, New York, and London (www.ewhealthcare.com).

© 2019 Private Equity Professional | August 23, 2019

Sigma Electric Acquires Avalon

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Sigma Electric Manufacturing, a portfolio company of Argand Partners, has acquired Avalon Precision Casting.

Avalon is a manufacturer of thin wall investment castings products that are used by OEM manufacturers in the aerospace, defense, HVAC, power, agriculture, and oil & gas markets. The company has capabilities in stainless steel, carbon steel, aluminum, bronze, brass and specialty alloys.

Avalon’s services include rapid prototyping, design and build of tooling, heat treating, machining, assembly, non-destructive testing services, and supply chain management. The company, led by CEO David Palivec, is headquartered in Cleveland with two additional facilities in Jackson, WI and Markesan, WI (www.avalon-castings.com).

Sigma Electric is a designer and manufacturer of small and complex metal components used in the electrical, lighting, home appliances, telecom, industrial and process instrumentation sectors. The company’s die-casting and sand-casting manufacturing technologies produce components with complex shapes and tight tolerances across a range of metals and alloys including aluminum, zinc, copper alloys, iron, and steel. Sigma operates a 180,000 sq. ft. warehouse and distribution center in the Raleigh suburb of Garner, NC  and has twelve manufacturing facilities in India and Mexico (www.sigmaelectric.com).

The buy of Avalon extends Sigma’s North American manufacturing footprint and the combined business will be better able to manage its customers’ global supply chains. “This acquisition combines the excellent investment casting capabilities of Avalon with the global presence and strengths of Sigma,” said Viren Joshi, CEO of Sigma. “The combination of both companies will add value for our combined customer base, as together we create a more comprehensive product and service offering leveraging the strengths of both companies.”

Argand Partners was founded in 2015 by long-time ex-Castle Harlan colleagues Heather Faust, Howard Morgan, and Tariq Osman. Sigma Electric, acquired in October 2016, was the firm’s first portfolio company. Argand makes control investments in industrial manufacturers and service providers that have at least $20 million in EBITDA. The firm has approximately $600 million in assets under management and is headquartered in New York (www.argandequity.com).

(Editor’s note: The Argand lamp, a kind of oil lamp, was invented and patented in 1780 by Aimé Argand. The lamp became popular because its light output was brighter than that of earlier lamps).

© 2019 Private Equity Professional | August 22, 2019

PMC Capital Buys StyroChem

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PMC Capital Group has acquired StyroChem Canada, a manufacturer of expandable polystyrene (EPS), from WinCup, a manufacturer of disposable foodservice products.

StyroChem’s EPS products are used in foodservice, packaging, construction, casting and other specialty applications. The company, with annual revenues of approximately $100 million, was founded in 1975 and is led by President Glenn Wredenhagen. StyroChem is headquartered near Montreal in Baie-D’Urfé, Canada (www.styrochem.com).

PMC Capital is partnering with the existing StyroChem management team on this transaction. “This partnership with PMC Capital will allow us to continue operating from our facility in Quebec and, most importantly, serve our existing customers and product lines, as well as aggressively pursue growth opportunities, both organically and through future acquisitions,” said Mr. Wredenhagen.

“We are excited to partner with StyroChem’s management team and help lead the business through the next stage of its growth,” said Michel Tamer, managing member of PMC Capital. “We see significant opportunities to deepen relationships with existing customers through product innovations, including StyroChem’s proprietary EVRgreen EPS, an expandable polystyrene resin that promotes biodegradation, and expand our reach through new customer acquisition.”

WinCup is a manufacturer of disposable polystyrene cups, bowls, containers, straws and lids. The company has seven manufacturing locations and is headquartered near Atlanta in Stone Mountain, GA (www.wincup.com).

PMC Capital Group is part of PMC Global, a multinational conglomerate which operates businesses in the chemical, liquefied natural gas, pharmaceutical, plastics, packaging, construction, financial, machinery and fabrication, and health and beauty industries. PMC Capital, based near Los Angeles in Sun Valley, CA, invests in corporate carve-outs, recapitalizations, and founder-owned companies in the TMT, consumer, healthcare, business services and industrial sectors (www.pmcglobalinc.com).

© 2019 Private Equity Professional | August 22, 2019

O2 Continues Build of EMEX

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EMEX, a portfolio company of O2 Investment Partners since June 2018, has made an investment in BLUEFIN.

BLUEFIN is a facility management consultant specializing in roof asset management, building envelope management, pavement management and energy management services. Customers of the company include large multi-facility owners in the education, banking, food processing, grocery, government, industrial and commercial sectors.

The company was founded in 2005 and has assessed more than 40,000 buildings across North America with more than one billion square feet of roof area. BLUEFIN was founded by CEO Richard Rast and is headquartered near Denver in Greenwood Village, CO (www.bluefinllc.com).

“We are excited to be joining the EMEX team,” said Mr. Rast. “BLUEFIN has always focused on improving facility performance for our customers through a suite of asset management services in roofing, pavement, building envelope, and renewable energy consulting. Combining BLUEFIN with EMEX extends our service offerings more deeply into facility energy issues, including renewables, sustainability, and demand management.”

EMEX is a provider of energy-related software and consulting services. The company’s enterprise software is used to uncover the lowest rates for electricity and natural gas supply, specifically in commercial and industrial end markets, and facilitates the brokerage of electricity and natural gas procurement in regulated and deregulated markets across the United States. EMEX, led by CEO Daniel Marzuola, was founded in 2007 and is headquartered in Houston, TX with eight additional offices in Texas, New Jersey, Massachusetts, Pennsylvania, and Maine (www.energymarketexchange.com).

“The addition of BLUEFIN to the EMEX platform is transformational,” said Joe Vallee, a vice president at O2. “Our service offering now addresses the costliest elements with respect to the successful maintenance and operation of any commercial building. The combination expands our ability to utilize proprietary software to provide recession-resistant services to facilities worldwide.”

The buy of BLUEFIN follows EMEX’s June 2019 add-on acquisition of Patriot Energy Group, a Burlington, MA-based electricity and natural gas management firm (www.patriotenergygroup.com).

O2 makes control investments of $5 million to $75 million in companies with EBITDAs from $2 million to $10 million located anywhere in the US and Canada but prefers the Midwest and the Great Lakes regions. Sectors of interest include niche manufacturing, niche distribution, select service businesses, and certain technology businesses.

In October 2017, the firm held a final closing of its Oxygen Fund with an above-target $100 million of capital commitments. O2, based in the Detroit suburb of Bloomfield Hills, is backed by the Orley family which has been investing in operating businesses and real estate since 1950 (www.o2investment.com).

© 2019 Private Equity Professional | August 22, 2019

LFM Hires Conner Harris

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LFM Capital has hired Conner Harris as a new director of the firm. Mr. Harris will be active with transaction review and execution, as well as portfolio company strategy, monitoring and support.

“We are excited to add Conner to the LFM team and look forward to integrating his experience in executing middle-market acquisitions as we source, evaluate and invest in niche manufacturing and industrial services companies,” said Steve Cook, executive managing director of LFM. “Conner’s private equity experience coupled with his engineering background make him an excellent fit with LFM’s strategy of leveraging our operating experience to support and guide the transformation of our portfolio companies.”

Mr. Harris has more than nine years of private equity, banking and investment management experience. Prior to joining LFM, he was a vice president in the Dallas office of The Riverside Company where he executed investments across multiple industries and worked with portfolio companies to develop and execute growth plans. Earlier in his career, he was a vice president at Business Development Corporation of America (BDCA), a senior associate in Riverside’s New York office, an investment banking analyst at BlackArch Partners, and a mechanical engineer at Westinghouse. Mr. Harris has a BS in Mechanical Engineering from North Carolina State University.

LFM invests in US-based manufacturing and industrial services companies with at least $3 million of EBITDA and enterprise values from $15 million to $125 million. In October 2018, LFM closed its second fund, LFM Capital Partners II LP, with $184 million in capital commitments. The firm’s earlier fund closed in October 2014 with $110 million of capital commitments. LFM was formed in May 2014 by Steve Cook, Rick Reisner, and Dan Shockley and is headquartered in Nashville (www.lfmcapital.com).

© 2019 Private Equity Professional | August 22, 2019

CenterOak Sells TruRoad to Safelite

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CenterOak Partners has sold TruRoad Holdings, the second-largest automotive glass and claims-management company in the United States, to Safelite Group, a subsidiary of Belron Group.

TruRoad was formed by CenterOak in February 2018 through the combination of JN Phillips Auto Glass and existing CenterOak platform investment Techna Glass.

TruRoad provides windshield replacement, repair, and recalibration services through its JN Phillips Auto Glass, Techna Glass, Windshield Centers, and Harmon Auto Glass service brands; and insurance claims services through its StrategicClaim software and services unit.

The company serves more than 400,000 customers annually – including consumers, insurance firms, and fleets  – through its network of over 95 corporate and franchise locations, fleet of over 300 mobile service units, three auto glass contact centers, two technology and claim centers, and an affiliated network of over 5,000 independent auto glass shops. TruRoad is led by CEO Bob Rosenfield and is headquartered in Woburn, MA (www.truroad.com).

“Our partnership with the CenterOak team has truly helped us to increase our capabilities much faster and smarter than we otherwise would have been able to accomplish,” said Mr. Rosenfield. “TruRoad and CenterOak shared a vision to capitalize on the fragmented nature of the auto glass replacement and repair market through a buy-and-build strategy. Over the course of the partnership we invested in technology, consolidated supply chain and purchasing power, implemented a single IT platform, and harmonized best operational practices, which all created value at an accelerated pace.”

“We are proud to have partnered with Bob Rosenfield and the TruRoad team in forming a leading platform in the highly fragmented auto glass replacement and repair market,” said Randall Fojtasek, managing partner of CenterOak. “The company has grown organically and through acquisitions while investing in new technology, key talent and support, training and recruiting technicians, and undergoing a large-scale integration effort. The management team’s talent and execution allowed the company to capitalize on these growth opportunities while maintaining their commitment to a differentiated customer service experience.”

CenterOak makes equity investments of $20 million to $90 million in companies with enterprise values of $50 million to $250 million. Sectors of interest include industrial distribution and manufacturing, business services, and consumer. CenterOak is based in Dallas (www.centeroakpartners.com).

Safelite Group, the buyer of TruRoad, was acquired by Belron in 2007 and is headquartered in Columbus, OH (www.safelite.com). Belron is a vehicle glass repair and replacement group operating worldwide across 35 countries and has more than 25,000 employees. The company’s brands include Autoglass in the UK and Ireland, Carglass in most of Europe, Safelite in the US, O’Brien in Australia, Smith & Smith in New Zealand, and Lebeau and Speedy Glass in Canada. Belron was founded in 1897 and is headquartered near London in Egham, UK (www.belron.com).  Belron was acquired by Brussels-headquartered D’Ieteren SA (Euronext: DIE) in 1999 (www.dieteren.com).

© 2019 Private Equity Professional | August 21, 2019

New Water Continues Auto Lighting Build

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Sea Link International, a portfolio company of New Water Capital since in March 2016, has acquired Hicks Plastics Company.

Hicks Plastics is a Tier II supplier of decorative and non-decorative injection molded components and sub-assemblies primarily for the automotive lighting industry. The company specializes in vacuum metallization, a decorative process that produces plastic parts with metalized finishes.

Hicks Plastics also provides engineering, tooling support, project management, and design-for-manufacturing services. The company was founded in 1988 and is headquartered near Detroit in Macomb, MI with a second facility in Knoxville, TN (www.hicksplastics.com).

The buy of Hicks Plastics is the fourth transaction completed by New Water in the automotive lighting sector. The three earlier investments were Amptech, a Wampum, PA-based manufacturer of electronics and electrical assemblies, acquired in November 2018; Myotek, an Irvine, CA-based Tier 1 designer, manufacturer and supplier of fog lamps for OEM automakers and other vehicle manufacturers, acquired  in October 2017; and Sea Link which was acquired in March 2016.

Sea Link designs and manufactures automotive lighting components for Tier 1 and OEM customers.  The company’s lighting research and manufacturing facilities are based in Shanghai and Kunshun City, China and have the capabilities to mold, metalize, stamp and/or die-cast various materials including resin, steel, aluminum and magnesium. The company, founded in 1988, is led by CEO Eric Showalter and is headquartered near Tampa in Largo, FL (www.sealinkinternational.com).

“The addition of Hicks Plastics to our automotive lighting platform will allow us to further integrate Sea Link’s in-house manufacturing and assembly capabilities,” said Mr. Showalter. “This important acquisition will give us increased flexibility and capacity to respond quickly and nimbly to changing market, political and economic conditions.”

“Hicks’ technical acumen and its long-standing reputation for quality and customer service, combined with its manufacturing footprint ideally located in the automotive hubs of Michigan and Tennessee, make it a perfect fit for our growing lighting platform,” said Brian McGee, a partner at New Water.

New Water invests in lower middle-market companies with revenues between $30 and $300 million.  Sectors of interest include consumer products, retail, and industrial manufacturing and services. The firm closed its first private equity fund at the hard cap of $406 million in July 2015. New Water was founded in September 2014 and is based in Boca Raton (www.newwatercap.com).

MBS Advisors, a mergers and acquisitions advisory firm specializing in the plastics industry, was the financial advisor to Hicks Plastics on this transaction.

© 2019 Private Equity Professional | August 21, 2019

Kinderhook Invests in Capital Waste Services

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Kinderhook Industries has acquired Capital Waste Services from Hawk Capital Partners. The buy of Capital Waste is Kinderhook’s 9th environmental services platform since its founding in 2003. Hawk Capital acquired Capital Waste in 2015.

Capital Waste is a regional provider of solid waste hauling services for residential, commercial and industrial waste generators. The Columbia, SC-headquartered company services sections of Richland and Lexington County under long-term municipal contracts as well as over 3,300 commercial and industrial waste customers. Capital Waste is led by CEO Matt Parker (www.capwasteservices.com).

“We look forward to the partnership with Kinderhook and leveraging the resources they bring to the table to accelerate the execution of our growth strategy,” said Mr. Parker. “The company is well-positioned to continue to grow by increasing its commercial and industrial penetration in existing markets and expanding all services into new geographies.”

“We are excited to welcome Capital Waste to the Kinderhook portfolio,” said Rob Michalik, a managing director at Kinderhook. “We look forward to accelerating the company’s growth through investments in people, equipment, and systems while maintaining the high-quality service levels Capital Waste is known for.”

Kinderhook makes control investments in companies with transaction values of $25 million to $150 million in which the firm can achieve financial, operational and growth improvements. The firm makes investments in non-core divisions of public companies, management buyouts of entrepreneurial-owned businesses, troubled situations, and existing small-capitalization companies lacking institutional support. Sectors of interest include healthcare services, environmental/business services, and automotive/light manufacturing. Kinderhook is headquartered in New York (www.kinderhook.com).

“Kinderhook is an ideal partner for the company,” said Jim Mirage, partner and co-founder of Hawk Capital. “They recognize the importance of high-quality service being the top priority for Capital Waste’s customers and will carry that priority forward as the company continues on its growth trajectory.”

Hawk Capital invests in Mid-Atlantic or Southeast-based companies that have revenues of $5 million to $40 million and EBITDA of $1 million to $8 million. Sectors of interest include distribution, food and beverage, industrial, branded consumer goods and services, direct marketing and web-based businesses, manufacturing, professional services, energy services, financial and leasing. The firm was co-founded by Mike Hagan and Jim Mirage and is headquartered in Bala Cynwyd, PA (www.hawkcapital.com).

Financing for this transaction was provided by Comerica Bank.

Kirkland & Ellis provided legal services to Kinderhook and Holland & Knight advised Hawk Capital.

© 2019 Private Equity Professional | August 21, 2019

Highview Promotes and Expands Team

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Middle-market private equity firm Highview Capital has promoted P.J. Gilbert to principal and Kapish Haldia to senior associate and has added Kelly Cash to its investment team as an associate.

“We are pleased to recognize both P.J. and Kapish with these promotions, and we are thrilled to add Kelly to the team,” said Ryan McCarthy, co-founder of Highview. “P.J.’s leadership was instrumental in the execution of two of our first three platform deals – American Plastics and Frontier Fire – and Kapish has distinguished himself as a key leader in our diligence and monitoring efforts on those transactions as well. P.J. and Kapish are vital parts of Highview’s long-term vision and we’re excited to welcome Kelly to the Highview team.”

Mr. Gilbert is active with all aspects of the firm’s investment process, including the sourcing, diligence and execution of new investments. He joined Highview in 2016 from JLL Partners, a New York-based private equity firm, where he was a vice president and earlier in his career, he was an associate at New York-based Lightyear Capital. Mr. Gilbert has a BS in Economics and an MBA from the Wharton School at the University of Pennsylvania.

Mr. Haldia is responsible for conducting due diligence of new investments, in addition to providing operational support to management teams across the firm’s portfolio.  He join the firm in 2016 from Citigroup where he was an investment banking analyst in the firm’s industrials group. Mr. Haldia has a BS in Finance and Economics from the Leonard N. Stern School of Business at New York University

As a new associate, Ms. Cash will focus on conducting due diligence of new investments and providing operational support to Highview’s portfolio companies. Prior to joining Highview, Ms. Cash worked at Goldman Sachs for four years, most recently as an investment banking analyst in the firm’s global industrials group. Ms. Cash has a BS in Accounting and a Master’s in Accounting from Auburn University.

Highview Capital, headquartered in Los Angeles, invests from $10 million to $125 million of equity in companies with revenues of $50 million to $500 million and EBITDA of $5 million to $50 million. Highview invests in many sectors and is effectively industry agnostic. The firm sources its capital from a $500 million evergreen fund and is backed by Karlin Asset Management, a Los Angeles-based investment company (www.highviewcp.com).

© 2019 Private Equity Professional | August 21, 2019

Blue Point Acquires VRC

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Blue Point Capital Partners has acquired VRC Holdings, a maker of rubber, plastic and sealing components, from Corporate Group.

VRC designs and manufactures a variety of products including seals, wiring grommets, tubing and molded thermoplastics that are used in the aerospace & defense, automotive, industrial, oil & gas, marine and medical end markets.

VRC operates through three subsidiaries: Ritus (based in Milwaukee) and its sister companies Vanseal (based near St. Louis in Vandalia, IL) and Classic Molding (based near Chicago in Schiller Park, IL). VRC was founded in 1963 and is headquartered in Milwaukee (www.ritus.com) (www.vansealcorp.com) (www.classic-molding.com).

“I am confident that our partnership with Blue Point will offer VRC both the capital and management expertise to help sustain our recent success and support our future growth initiatives, particularly in developing enhanced technical development capabilities, a stronger commercial presence and in pursuing acquisition opportunities in our fragmented industry space,” said Tom Gebhardt, the president of VRC.

“We are impressed with the quality and capacity of VRC’s current asset base and believe the company operates in an attractive niche of the industrial rubber and plastic component markets. We are grateful to have the opportunity to partner with Bill and Tom Gebhardt and support VRC in the next stage of its growth and evolution,” said John LeMay, a partner with Blue Point.

The buy of VRC is the fifth platform investment for Blue Point’s fourth fund, Blue Point Capital Partners IV LP, which closed at its hard cap of $700 million in January 2018. Blue Point invests in companies that are active in the manufacturing, distribution and business services sectors and have from $20 million to $300 million in revenue and EBITDA greater than $5 million. The firm has offices in Cleveland, Charlotte, Seattle, and Shanghai (www.bluepointcapital.com).

Blue Point has invested in the elastomeric components market before through Quality Synthetic Rubber (QSR), a Twinsburg, OH-based maker of molded silicon rubber components used by electrical connector suppliers in the automotive, medical, transportation and industrial markets. Blue Point acquired QSR in July 2007 and sold the company in July 2012 to Lexington Precision, then a portfolio company of Industrial Growth Partners.

“Over the last five decades, VRC has continually looked for ways to expand its platform and add value for their customers. Blue Point has partnered with over 25 custom material manufacturers over the years and is positioned to support management in identifying the most attractive paths for growth and building additional internal capabilities to execute against the core growth strategies,” said Jonathan Pressnell, a principal with Blue Point.

Corporate Group, the seller of VRC, is a Milwaukee-based private equity firm that invests from $2 million to $20 million in US-based companies that have annual revenues up to $50 million and are active in engineered products and value-added construction services (www.corporategroupinc.com).

© 2019 Private Equity Professional | August 20, 2019

LaSalle Buys Another AR Management Company

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LaSalle Capital has made an investment in Professional Recovery Consultants (PRC), a provider of accounts receivable management services.

Customers of PRC include hospitals and physician groups and other companies that are active in the healthcare industry as well as governments, utilities, and retailers. The company, led by President Geoff Miller, was founded in 1979 and is based in Durham, NC (www.prorecoveryinc.com).

“We are extremely pleased to have LaSalle Capital lead the next chapter of growth for Professional Recovery Consultants,” said Mr. Miller. “LaSalle is the perfect partner to help expand the business to meet the ever-changing needs of our customers and to advance the innovative solutions that our customers depend on. They have an in-depth understanding of collections businesses, supported by their previous investments in Receivables Management Partners and Brown & Joseph.”

LaSalle Capital sold Itasca, IL-based Brown & Joseph, a provider of commercial accounts receivable management services, to Incline Equity Partners in June 2019; and from 2007 to 2012 LaSalle owned Receivables Management Partners, a Greensburg, IN-based provider of accounts receivable management services specializing in the healthcare industry.

“The team at PRC has built an impressive business and achieved substantial organic growth,” said Ryan Anthony, a partner at LaSalle Capital. “We look forward to working with the team to help accelerate the expansion of the business through investments in people and technology as well as strategic add-on acquisitions.”

LaSalle Capital makes control investments of $10 million to $20 million in companies with revenues from $20 million to $100 million and EBITDA greater than $3 million. Sectors of specific interest include food and beverage, and technology-enabled business services. LaSalle Capital is based in Chicago (www.lasallecapitalgroup.com).

© 2019 Private Equity Professional | August 20, 2019

Riverside Loves Fire Safety

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The Riverside Company has acquired Performance Systems Integration (PSI), a provider of fire and life safety services, from Peterson Partners.

PSI’s services include system inspection, service and monitoring, equipment sales, and cylinder repairs as well as installations for new construction and retrofits. The company’s customers include hospitals, assisted living facilities, commercial and industrial buildings, schools, and hotels.

PSI operates in partnership with Fire King, a provider of fire extinguisher sales and services, cylinder requalification and maintenance services. The company, founded in 2002 and led by CEO Travis Everton, is headquartered in Portland, OR with an additional office near Seattle in Bothell, WA (www.psintegrated.com).

“Fire and life safety services are critical to any region, and we are thrilled to partner with the PSI team to help extend their geographic reach,” said Loren Schlachet, a managing partner at Riverside. “During our partnership, we plan to round out the platform with strategic add-ons, create a technician training academy and expand upon PSI’s sales and marketing efforts.”

The buy of PSI is the second fire and life safety platform Riverside has acquired in the past three months. In June 2019 the firm purchased CertaSite, an Indianapolis-based provider of fire and life safety services (www.certasiteprotected.com).

“The market for fire and life safety businesses continues to be attractive, and we’re looking for interested sellers,” said John McKernan, a principal at Riverside. “We are specifically looking for full-service fire protection companies with strong technicians, specializing in the inspection, repair and monitoring of fire and life safety equipment.”

Working with Mr. Schlachet and Mr. McKernan on the transaction were Operating Partner Ervin Cash, Finance Director Bart Thielen, and Senior Associate Liz Burke. Partner Joe Lee sourced the transaction for Riverside.

The Riverside Company is a global private equity firm focused on investing in and acquiring growing businesses valued at up to $400 million. Since its founding in 1988, Riverside has invested in more than 600 transactions and its portfolio includes more than 90 companies. The firm is headquartered in New York (www.riversidecompany.com).

Peterson Partners invests from $5 million to $25 million in companies with revenues from $5 million to $100 million and EBITDA from $2 million to $20 million. Sectors of interest include business services, consumer products, software, healthcare, retail, and financial services. The firm is currently investing through its eighth fund and is based in Salt Lake City, UT (www.petersonpartners.com).

© 2019 Private Equity Professional | August 20, 2019

Argonaut Hits Hard Cap

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Argonaut Private Equity has held a final closing of Argonaut Private Equity Fund IV LP at its hard cap of $400 million.

Tulsa-based Argonaut invests in companies that are active in the energy services, manufacturing and industrial sectors. The firm was founded in 2002 and over its history has invested more than $3 billion of capital in more than 100 direct investments (www.argonautpe.com).

Limited partners in the new fund include pension funds, endowments, financial institutions and family offices from both the United States and abroad. “This fund is the next chapter in a legacy of identifying unique opportunities across historically underserved regions and creating long-term value for our partners and investors,” said Kelby Hagar, the president of Argonaut.

Argonaut held a first close for the new fund in August 2018 with $230 million of commitments and has already invested in four portfolio companies and deployed over $120 million of its equity capital.

“Since holding our first close last year, Argonaut has made investments in multiple platform companies across our target sectors and continues to seek out highly capable management teams wanting to partner and execute on growth initiatives,” said Steve Mitchell, CEO and managing director of Argonaut.

The most recent acquisition by Argonaut was the buy of Houston-based Mammoth Carbon Products, a distributor of carbon steel pipe in Texas and Colorado (www.mammothcarbon.com).

Argonaut’s prior fund, Argonaut Private Equity Fund III LP, closed with $600 million of capital commitments in July 2016.

© 2019 Private Equity Professional | August 20, 2019

SK Capital Buys PolyOne Business

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SK Capital has agreed to acquire the performance products and solutions business (PPB) of PolyOne Corporation for approximately $775 million.

PPB is comprised of Geon Performance Materials, a maker of polyvinyl chloride (PVC) compounds; and Producer Services, a maker of a range of formulated polypropylene and thermoplastic polyolefin products, and a provider of contract manufacturing services. PPB has twelve manufacturing locations across North America and Asia and has approximately 1,100 employees. PPB has annual sales of approximately $700 million and its products are sold to companies that are active in the construction and automotive end markets.

Geon dates back to 1927 when BFGoodrich discovered and produced the first usable vinyl polymer. In 1948 the company created a vinyl plastic division based on this technology and later, in 1993, spun off the division through a public offering creating Geon.

“PPB is a market leader with a rich heritage in the PVC and polypropylene compounding industry,” said Jack Norris, a managing director of SK Capital. “We are excited about the opportunity to further strengthen the business through both growth and improvement initiatives, similar to how we’ve approached several other investments that were corporate carveouts.”

SK Capital invests in the specialty materials, chemicals and pharmaceuticals sectors and typically invests equity of $100 million to $200 million in each portfolio company. In February 2019 the firm held a final closing of SK Capital Partners Fund V LP with total committed capital of $2.1 billion. The firm’s earlier fund was raised in 2014 with $1.0 billion of capital. SK Capital is headquartered in New York (www.skcapitalpartners.com).

PolyOne Corporation (NYSE: POLY) is a provider of materials and services including specialty polymer formulations, color and additive systems, polymer distribution and specialty vinyl resins. The company had revenues in 2018 of $3.5 billion and has 60 manufacturing sites and 9 distribution facilities in North America, Europe, Asia and South America. PolyOne, headquartered near Cleveland in Avon Lake, OH, was formed in 2000 from the merger of M.A. Hanna Company and The Geon Company (www.polyone.com).

“We conducted what became a very competitive bidding process for our PPB segment,” said Robert Patterson, the chairman, president and CEO of PolyOne. “Ultimately, we determined that divesting the business to SK Capital Partners would provide greater flexibility to accelerate our specialty growth strategy and is in the best interest of customers, employees and shareholders.”

Committed debt financing for this acquisition is being provided by Cerberus Business Finance.

HSBC was the financial advisor to PolyOne on this transaction which is expected to close in the fourth quarter of 2019.

© 2019 Private Equity Professional | August 19, 2019

Centerbridge Invests in GoHealth

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Centerbridge Partners has acquired GoHealth, a provider of direct-to-consumer sales, marketing and customer service products used by health insurance providers.

Through a range of distribution channels, GoHealth connects consumers with insurance carriers in the Medicare, individual and family, and small group markets. The company’s products and services allow insurance carriers to both lower their marketing expenses and improve customer acquisition and retention.

Chicago-based GoHealth was founded in 2001 by President Brandon Cruz and CEO Clint Jones, who will continue to lead the business and retain an ownership stake in the company in partnership with Centerbridge (www.gohealth.com).

“In the two decades since its founding, GoHealth has been committed to making health insurance accessible, affordable, and personalized for individuals across the country,” said Mr. Jones. “Centerbridge’s significant investment, and extensive expertise in the healthcare and financial services sectors, will position GoHealth to improve its balance sheet, further invest in technology and innovation, and deepen market penetration for the benefit of our customers and the consumers they serve.”

“GoHealth is a leading player in a large and rapidly growing market, uniquely positioned to capitalize on the significant opportunities ahead,” said Mr. Cruz. “We are poised to benefit from secular industry trends driving growth in the Medicare Advantage segment, including new consumers aging into Medicare and seniors’ increasing propensity to buy healthcare plans online. We are excited to be partnering with Centerbridge, and to lead GoHealth in the next chapter of our growth.”

“GoHealth is a highly differentiated industry-leader operating in rapidly expanding markets with a demonstrated track record of successfully entering new market segments and driving consistent growth,” said Jeremy Gelber, a senior managing director at Centerbridge. “In bridging the gap between consumers and insurance carriers, the company provides an innovative and highly scalable service to its broad network of healthcare relationships.”

Centerbridge invests from $50 million to $300 million in US-based leveraged buyouts and distressed securities. Sectors of interest include consumer, financial services, healthcare, industrials, real estate, and technology, media & telecom. The firm has $28 billion of capital under management and is headquartered in New York with an additional office in London (www.centerbridge.com).

“GoHealth will be a compelling addition to our investment portfolio, and we look forward to working with its world-class team, led by its accomplished co-founders, in the company’s next phase of growth,” added Mr. Gelber.

This transaction is expected to close in the fourth quarter of 2019.

© 2019 Private Equity Professional | August 19, 2019

Mill Point Closes Transformers Carve-Out

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Mill Point Capital has completed the carve-out of the power transformers division of publicly traded Pioneer Power Solutions for $68 million comprised of $60.5 million in cash and $7.5 million in seller’s notes.

Pioneer Transformers engineers, designs and assembles specialty electrical transformers for utility, industrial, commercial, renewable energy and data center market applications. The company provides both liquid-filled and dry-type transformer products through its US, Canada and Mexico operations.

The acquired business includes the assets of Pioneer Transformers and Pioneer Dry Type Transformer Group, which includes Jefferson Electric, Bemag Transformer, and Harmonics Limited (www.pioneertransformers.com) (www.pioneerdrytypegroup.com) (www.jeffersonelectric.com) (www.bemag.ca) (www.harmonicslimited.com).

“The North American power grid requires significant investment in both new capacity and replacement units to keep pace with ever-increasing electrical demand,” said Dustin Smith, a partner at Mill Point. “Given Pioneer’s strong market position and reputation for providing reliable custom-engineered power transformer solutions, we are confident that the company will capitalize on these favorable industry tailwinds as a standalone entity.”

“Pioneer Transformers is led by an excellent team that has earned a reputation for quality products, superior engineering capabilities and excellent levels of customer service. With strong brand equity, a history of operational excellence and the ability to now focus exclusively on its core transformer operations, the company is well-positioned to seize compelling growth opportunities,” said Antony Besso, an executive partner of Mill Point.

Mill Point makes control-oriented investments of $15 million to $80 million in middle-market companies that have enterprise values of $50 million to $250 million. Sectors of interest include business services and industrial. Mill Point Capital closed its inaugural institutional fund, Mill Point Capital Partners LP, at its hard cap of $450 million in May 2018. The firm was founded by Managing Partner Michael Duran and is based in New York (www.millpoint.com).

Pioneer Power Solutions (NASDAQ: PPSI) manufactures and services a range of specialty electrical transmission, distribution and on-site power generation equipment for applications in the utility, industrial, commercial and backup power markets. The company is headquartered in Fort Lee, NJ (www.pioneerpowersolutions.com).

Lincoln International was the financial advisor to Pioneer Power Solutions.

This transaction was first announced on July 1, 2019 – Mill Point Takes Pioneer Transformers

© 2019 Private Equity Professional | August 19, 2019