Archives for January 2020

Kinderhook Gets Big Multiple on Stratus Exit

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Kinderhook Industries has agreed to sell Stratus Video to publicly traded AMN Healthcare Services for $475 million. The valuation multiple for this transaction appears later in this article.

Clearwater, Florida-based Stratus Video is a provider of video remote interpretation, over-the-phone interpretation and in-person interpretation services used in the healthcare industry. The company has a network of 3,000 on-shore and off-shore interpreters and more than 1,600 customers including health systems, acute care hospitals, community health centers, federally qualified health centers, ambulatory surgery centers, and post-acute and home health providers.

Kinderhook acquired Stratus (then CSDVRS, LLC) in February 2015 from M/C Partners, Providence Equity Partners and Communication Service for the Deaf.

During its ownership term, Kinderhook closed two add-on acquisitions with the buys of InDemand Interpreting, a Seattle-based provider of video and audio interpretation services, in May 2019; and Optimal Phone Interpreters, a Winter Park, Florida-based provider of over-the-phone interpretation and document translation services, in January 2016.

Through year-end 2019, Stratus Video had TTM revenues of $119 million and TTM adjusted EBITDA of $34 million. Based on a $475 million purchase price, this equates to a 14x adjusted EBITDA purchase price multiple.

“Our investment in Stratus highlights the key tenets of Kinderhook’s investment strategy – partnering with world-class management teams to aggressively grow businesses in niche markets both organically and through acquisition,” said Chris Michalik, a managing director at Kinderhook. “This is a great outcome for Kinderhook, Stratus and its employees and we are very proud of the accomplishments of Stratus’ team, led by David Fetterolf and Maureen Huber, and we expect the company to continue to flourish as part of AMN Healthcare.

AMN Healthcare (NYSE: AMN) provides travel-nurse staffing services and outsourced recruitment and placement of interim and permanent executive leadership, physicians and dentists. The company has revenues of more than $2 billion and is headquartered in San Diego.

New York City-based 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.

Last month, Kinderhook held a final closing of its sixth private equity investment fund, Kinderhook Capital Fund VI LP (along with a parallel fund, together “Fund VI”), at its hard cap with $1 billion of limited partner commitments. The new fund was oversubscribed and is the largest fund ever raised by Kinderhook.

Evercore was the financial advisor to Stratus Video and J.P. Morgan advised AMN.

The buy of Stratus Video by AMN is expected to close in early March 2020.

© 2020 Private Equity Professional | February 3, 2020

Stephens Carves S&D from Cotts

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Westrock Coffee Company, a portfolio company of The Stephens Group, has agreed to acquire S&D Coffee & Tea (S&D) from publicly traded Cott Corporation for $405 million in cash.

S&D Coffee & Tea is the largest coffee and tea manufacturer and supplier to restaurants and convenience stores in America; and also produces liquid coffee, tea, and botanical extracts. The company’s products are sold to more than 110,000 customers through national distribution and direct store delivery. S&D, led by CEO Ron Hinson, was founded in 1927 and is headquartered in Concord, North Carolina.

Cott Corporation acquired S&D in 2016 for $355 million which, at that time, was a 6x post synergy adjusted EBITDA multiple.

Little Rock, Arkansas-based Westrock Coffee, acquired by Stephens in 2017, is a vertically integrated branded and private label coffee company that sources, roasts, packages, sells and distributes to companies operating in the retail and hospitality markets. Westrock has offices in seven countries and is led by Scott Ford, co-founder and chief executive officer.

According to Westrock Coffee, the buy of S&D will create the leading integrated coffee company serving the needs of the retail, restaurant, convenience store, and hospitality industries. Once combined, the two companies will be led by Mr. Ford with Mr. Hinson continuing as chairman emeritus and it will have more than 1,700 employees and the capacity to roast, grind, and package more than 220 million pounds of coffee annually. Westrock will remain headquartered in Little Rock and S&D’s facilities in Concord will continue as a major center of operations with plans to continue the expansion of these facilities.

“This strategic combination will create the nation’s premier coffee, tea, and extract supplier that is capable of serving the most complex and demanding customers across the country and around the world,” said Mr. Ford. “We intend to use the scale of the new company to offer the most innovative beverage solutions with competitive pricing to our global clients while simultaneously providing a premium price to our farmer partners at origin.”

As part of this transaction, BBH Capital Partners will provide acquisition capital alongside The Stephens Group and other Westrock Coffee investors.

Boston-based BBH Capital Partners makes control and non-control investments of $50 million to $150 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.

Little Rock, Arkansas-based The Stephens Group is a family-office that makes both minority and control investments in public and privately held companies. Sectors of interest include industrial and commercial products and services, specialty distribution, technology infrastructure and tech-enabled services, B2B food and beverage, and consumer products.

Cott Corporation (NYSE: COT; TSX: BCB) is a provider of water, coffee, coffee extracts, tea and filtration services in both North America and Europe, to more than 2.5 million customers including residences, businesses, restaurant chains, hotels and motels, retailers, and healthcare facilities. The company is led by CEO Tom Harrington and is headquartered in Tampa.

Cott has been actively moving towards becoming a pure-play water company. Earlier this month it agreed to acquire Primo Water, a provider of water dispensers, bottled water, and self-service refill drinking water, for $775 million.

“The combination of the sale of S&D, along with the recent announcement of Cott’s acquisition of Primo Water, positions Cott to be a pure-play water solutions provider with financial metrics more in line with our water peers,” said Mr. Harrington. When the buy of Primo is completed, Cott will change its corporate name to Primo Water.

© 2020 Private Equity Professional | February 3, 2020

Kian and ParkSouth Form IT Services Platform

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Kian Capital Partners, in partnership with ParkSouth Ventures, has acquired Enterprise Computing Services (ECS) and My IT. Both companies are providers of IT managed services.

ECS, founded in 1994 and based in Shreveport, Louisiana, has 45 employees and serves customers in northern Louisiana and eastern Texas. My IT, founded in 2000 and based near New Orleans in Metairie, Louisiana, has 25 employees and serves customers in southern and central Louisiana.

The newly combined companies, led by ECS’s chief executive officer Kevin Cook, will now provide remote monitoring, technical support, hosted cloud, disaster recovery, virtual CIO and security services to small and mid-size businesses, and has begun adopting the My IT brand across all its operations.

My IT is a portfolio company of Vancouver, British Columbia-based Top Down Ventures. “The successful combination of ECS and My IT will allow our partner and current CEO of My IT, Patrick Leonard, to focus his full attention on our portfolio company Backup Radar, a Vancouver-based IT services provider,” said Greg Celmainis, a managing director at Top Down which is exiting its investment in My IT. “We are very pleased to see My IT join forces with ECS to form the preeminent provider of IT managed services in the Gulf South.”

“ECS and My IT have each forged successful, growing businesses by establishing enduring client relationships, solution-oriented service and support, and professional, responsive teams,” said Mr. Cook. “Kian’s collaborative approach made them the perfect partner for us as we seek to capitalize on a number of growth initiatives. It was clear from the start that they don’t just provide capital but offer an experienced team to help drive value through a partnership-oriented approach.”

“ECS and My IT are two industry-leading managed service providers differentiated by their full suite of cutting-edge solutions offered to a growing and loyal customer base,” said Matt Levenson, a partner at Kian Capital. “We are excited to partner with and support Kevin and the collective teams at ECS and My IT to help develop strategies that will further accelerate growth and provide clients with exceptional IT services and solutions that meet their complex needs.”

Charlotte and Atlanta-based Kian Capital makes both control and minority investments of $7 million to $30 million of equity and subordinated debt in companies that have revenues of $10 million to $100 million and EBITDA of $2 million to $15 million. Sectors of interest include consumer, services, specialty manufacturing and value-added distribution. In March 2018 the firm held a final hard cap closing of KMP II LP with total capital of $275 million.

Kian partnered on this transaction with Charlotte-based ParkSouth Ventures. ParkSouth invests in United States-based founder or family-owned service businesses that have revenues of more than $10 million.

Kian and ParkSouth intend to pursue add-on acquisitions for their new IT services platform that expand its service territories, service offerings and capabilities.

© 2020 Private Equity Professional | February 3, 2020

BGL: PE Targeting the Automotive Aftermarket

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Investment bank Brown Gibbons Lang has just published a new report, Automotive & Aftermarket Insider: The Deal Engine, that looks at recent developments and changes occurring in the automotive industry. A link to download a PDF copy of the report is available below.

Andrew Petryk, a managing director and head of industrials; and Todd Cassidy, a managing director and head of automotive & aftermarket, authored the report for BGL. Mr. Cassidy joined BGL in December 2019 to lead the firm’s expansion into the automotive sector. Earlier in his career he led the North American automotive and aftermarket practice at Raymond James and William Blair.

According to BGL, private equity funds are aggressively seeking automotive aftermarket assets, with consolidation a key strategy to grow market share. As BGL states, industry fragmentation is conducive to acquisitive growth, with sponsors pursuing buy-and-build strategies to create more scalable platforms for these businesses.

In addition, technological developments and changing consumer preferences are shifting vehicle demand and supplier business models. Consumers are foregoing passenger cars for trucks and SUVs with lower gas prices, improved vehicle design, and a stronger economy among the major drivers of the shift. For original equipment manufacturers, this move is giving way to wider margins and encouraging healthy aftermarket sales as the higher-content, higher-priced vehicles are more favorably disposed to customization.

Automotive companies are making the transition to electric vehicles (EV) and hybrids, driven by government policy mandating compliance with tightening emissions standards and bans on the sale of new petroleum burning vehicles. Major automakers have committed billions, announcing major investments in electrified models and autonomous vehicle technology to accelerate EV adoption. Investors are seeking attractive niches in the evolving automotive landscape to participate in this market growth.

Another trend identified by BGL is that significant capital is being deployed in autonomous vehicles and new active safety technology. More than $100 billion has been invested in new mobility over the last four years.

Brown Gibbons Lang is a mid-market investment bank that specializes in mergers and acquisitions, divestitures, capital markets, financial restructurings, valuations and fairness opinions. The firm was founded in 1989 and has investment banking offices in Chicago, Cleveland, and Philadelphia.

Click HERE to download your free copy of Automotive & Aftermarket Insider: The Deal Engine.

© 2020 Private Equity Professional | February 3, 2020

Lakeview Buys Mochi Ice Cream

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Lakeview Capital, through its affiliated funds, has acquired The Mochi Ice Cream Company from Century Park Capital Partners. Century Park acquired the business – then Mikawaya, a 105-year-old producer of Japanese pastries and specialty frozen desserts – in July 2015.

The Mochi Ice Cream Company (MICC) is known as the creator of mochi ice cream, a small, round dessert ball consisting of a soft, pounded sticky rice cake (mochi) on the outside and an ice cream filling on the inside.  The most popular flavors are green tea and mango, as well as more traditional favorites like kona coffee, cookies and cream, mint chip, chocolate, strawberry, vanilla and others.

MICC’s products – sold under the brand names My/Mo and Mikawaya – are distributed through both regional and national grocery chains and independent stores, as well as through Japanese and general food service locations. The company estimates that it has an 80% share of the mochi ice cream market.

Competing mochi ice cream brands include Hawaii-based Bubbies (owned by Chicago-based Kenex Holdings), Maeda-En (owned by California-based G.T. Japan) and Mr. Mochi (owned by New York-based MGT Foods).

MICC, led by CEO Craig Berger, was founded in 1910 by Ryuzaburo Hashimoto and is headquartered near Los Angeles in Vernon, California.

“Under Lakeview’s ownership, we are very excited to continue building on the incredible momentum we have generated,” said Mr. Berger. “Lakeview has a proven track record of success, and through our shared vision and collaboration, we will continue to grow and expand our business.” Mr. Berger and other members of the MICC management team will remain with the company in their current roles under Lakeview ownership.

“We’re thrilled to be partnering with a focused, seasoned management team to support growth in the snack category, a segment we find very attractive,” said Jake Freeman, director of investments for Lakeview Capital. “We are closely aligned with the team on our plans to deploy significant capital to continue to build a leading, global branded mochi snack platform.”

Lakeview Capital is a family office based in Birmingham, Michigan. The firm is affiliated with Jay Alix, the founder of turnaround consulting firm Alix Partners.

Century Park invests from $10 million to $40 million in middle-market companies that have revenues of $20 million to $100 million and EBITDA of $3 million to $15 million. The firm is based near Los Angeles in El Segundo, California.

Martin Sarafa, a managing partner at Century Park, led the investment in MICC. “The Mochi Ice Cream Company has become one of the fastest-growing branded snacking platforms in the country. The future for mochi ice cream is incredibly bright and we could not be prouder of what this team has accomplished,” said Mr. Sarafa.

“Century Park has been an incredible partner for The Mochi Ice Cream Company,” added Mr. Berger. “Their strategic vision and operating philosophy plus their outstanding relationship with the senior management team unleashed the tremendous growth of the My/Mo Mochi Ice Cream brand. It has been a great four-plus years and we can’t thank them enough for all of their support. We look forward to carrying the positive momentum into our next phase of growth with Lakeview Capital.”

Financing for this transaction was provided by LBC Credit Partners, PineBridge Investments and WhiteHorse Capital.

Houlihan Lokey was the financial advisor to Century Park, and Lakeview Capital was advised by Plante Moran.

© 2020 Private Equity Professional | January 31, 2020

Wincove Builds Material Handling Platform

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Aloi Materials Handling & Automation, a portfolio company of Wincove Private Holdings, has acquired Mainstream, Inc.

Mainstream is a provider of preventative maintenance, repair services, integration and installation of large conveyor systems, utilized in parcel distribution facilities. The company is headquartered south of Louisville in Shepherdsville, Kentucky and has over 100 field technicians located throughout the United States.

Aloi is a provider of material handling and automation services to companies operating in the package handling, grocery, food & beverage, industrial and automotive markets. The company’s services include the integration of equipment, robotics and controls – including automated packaging lines, robotic and conventional palletizing, controls, conveyor systems, cranes and hoists – to improve workflow, optimize safety, and reduce costs; as well as ongoing maintenance of material handling and automation systems.

Aloi is a certified FANUC and Universal Robots integrator. The company was founded in 1977 and has facilities in Rochester (headquarters) and Corning, New York with a network of technicians operating in more than 30 states nationwide.

In April 2019, Aloi acquired Automated Cells & Equipment (ACE), a provider of robotic systems integration services. ACE is based in the upstate New York city of Painted Post.

Wincove Capital invests in lower middle-market companies that have annual revenues of under $100 million. The firm, with offices in Boston and New York, was founded in 2008 and is led by partners Michael McGovern and John Lenahan.

TCF Capital Funding provided $14 million in secured financing to support Aloi’s buy of Mainstream. “We are pleased to expand our relationship with Wincove and Aloi by providing senior financing to acquire Mainstream, which also included Aloi’s recent acquisition of Automated Cells & Equipment,” said Ed Ryczek, senior vice president at TCF Capital Funding. “The three combined companies create a full-service provider of material handling and automation solutions, from initial systems integration to the ongoing service and maintenance of the equipment.”

Chicago-based TCF provides cash flow and asset-based lending to lower middle-market businesses.  National in scope, this senior leveraged lending group focuses on providing private equity sponsor-backed cash flow loans and asset-based loans to companies with less than $100 million in revenue and between $2 million and $10 million in EBITDA.

© 2020 Private Equity Professional | January 31, 2020