Archives for August 2020

Incline’s AFC Buys Master Distribution

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AFC Industries, a portfolio company of Incline Equity Partners, has acquired Master Distribution.

The buy of Master Distribution is the eleventh add-on for AFC since being acquired by Incline’s third fund in March 2015 from Rockwood Equity Partners.

Master Distribution is a supplier of strut fittings, pipe hangers, beam clamps, aircraft cable (wire ropes), and metal framing supports, along with related connecting fasteners and hardware (nuts, screws, washers, and bolts) used in the commercial, industrial, infrastructure, utility and energy end markets.

The company’s galvanized, painted, and powder coated products are available in a range of metals including steel, stainless steel, aluminum, and zinc. Master Distribution is headquartered near Cleveland in Brunswick, Ohio.

AFC Industries distributes and provides vendor managed inventory programs for an array of standard and specialized fasteners and other industrial components including bolts, screws, nuts, rivets, fittings, springs, gaskets, hinges, keys, and latches.

AFC’s customers include original equipment manufacturers and assembly plants in the automotive, defense, fluid-handling, food equipment, lighting, medical and transportation sectors. In addition to providing inventory management and replenishment services, AFC’s service offerings include testing, quality assurance, assembly, kitting, packaging, and private labeling.

AFC was founded in 1987 and is headquartered near Pittsburgh in Bridgeville, Pennsylvania with additional facilities in Connecticut, Ohio, Minnesota, and Nevada.

“The acquisition of Master extends the boundaries of our core business by adding a robust line of adjacent products,” said Kevin Godin, CEO of AFC. “We are excited to apply our institutional experience and expertise to fuel growth at Master.”

“AFC showed tremendous resiliency through the recent market disruption, largely driven by the customer and end-market diversification,” said John Morley, a partner at Incline. “This acquisition further strengthens its position in the market by expanding its reach through additional product offerings.”

Given AFC’s highly fragmented market, Incline and AFC continue to seek additional add-on acquisitions of distributors that add to the company’s product portfolio, expand its geographic footprint, and build on its presence in existing markets.

Pittsburgh-based Incline Equity Partners was formed in 2011 and is led by its senior partners, Jack Glover, Justin Bertram, and Leon Rubinov. In January 2020, Incline closed its fifth fund, Incline Equity Partners V LP, with nearly $1.2 billion of capital.

Private Equity Professional | August 28, 2020

Longshore Closes Debut Fund, Stocks BPO Portfolio

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Longshore Capital Partners has closed its debut private equity fund, Longshore Capital Fund I LP, with total and oversubscribed capital commitments of $203 million.

The new firm was formed earlier in 2020 by LaSalle Capital professionals Ryan Anthony and Nicholas Christopher. Investors in Fund I include asset management firms, insurance companies, funds-of-funds, family offices, and high net worth individuals.

“We are thrilled with the reception we received during the fundraising process,” said Mr. Christopher. “The portfolio has performed well during the Covid-19 pandemic and we are highly optimistic about its prospects.”

Chicago-headquartered Longshore makes control investments in North America-based companies with $5 million to $15 million of EBITDA. Sectors of interest include business process outsourcing (BPO), revenue cycle management, and managed services and payments.

“We are excited to launch our firm and drive attractive returns for our investor base by focusing on identifying asymmetric risk/return investment opportunities in the services sector,” added Mr. Anthony.

In tandem with the closing of Fund I, Longshore has acquired a controlling interest in five business services companies from LaSalle Capital.

  • MetaSource, a Utah-based provider of business process outsourcing services to financial services companies. LaSalle invested in MetaSource in November 2013.
  • Eclipse Advantage, a Florida-based provider of specialized warehouse services including in-bound receiving, pallet management, and order selection to companies in the foodservice and retail sectors. LaSalle invested in Eclipse in June 2012.
  • Gen3 Marketing, a Pennsylvania-based marketing agency that provides digital marketing services, including pay-per-click, search engine optimization, social media, and other digital marketing campaigns. LaSalle invested in Gen3 in December 2017.
  • Oakpoint, a North Carolina-based provider of non-clinical support services to dentistry and orthodontic practices. LaSalle invested in Oakpoint in September 2019.
  • Professional Recovery Consultants (PRC), a North Carolina-based revenue cycle management company serving hospitals and physician groups. LaSalle invested in PRC in August 2019.

To complete these acquisitions, Longshore partnered with Spring Bridge Partners, a specialist investor active in secondary transactions and spin outs of investment teams and portfolios from institutions and family offices. New York City-headquartered Spring Bridge is led by co-founders and partners Luca Salvato and Sebastien Burdel.

“Spring Bridge is uniquely positioned to help GPs in the middle-market that have reached a transition point and are seeking a creative, value-added capital partner to invest in their future,” said Mr. Burdel. “We very much look forward to the partnership with Longshore as Nick and Ryan build out their franchise.”

Longshore used Shannon Advisors as its placement agent for Fund I and Winston & Strawn provided legal services.

Private Equity Professional | August 28, 2020

Lauren Smyers Joins Validor

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Validor Capital has added Lauren Smyers to its investment team as Principal, Business Development.

As her title implies, Ms. Smyers will be active sourcing new transactions for Validor with a specific focus on family-owned manufacturing and industrial service businesses in the lower middle market.

Ms. Smyers has eight years of private equity experience. Prior to joining Validor, she led business development at Tampa-based Weatherford Capital, and earlier she was active in marketing and investor relations at The Carlyle Group and Siguler Guff. Ms. Smyers has her undergraduate degree in behavioral neuroscience from Northeastern University.

“I am excited to be joining the team,” said Ms. Smyers. “Validor embodies a work ethic and collaborative spirit, which has enabled them to have great success. I look forward to working with the entire team and helping grow Validor’s portfolio.”

“We are thrilled to welcome Lauren to the team,” said Matthew Kaufman, managing partner at Validor. “Lauren’s track record and experience will enable Validor to be more proactive and responsive to the community of intermediaries we work with as well as providing key insights to the investment team, particularly given the dynamic deal and economic environment we are in today.”

Boca Raton, Florida-based Validor invests equity of up to $20 million in companies that have revenues from $10 million to $100 million and EBITDA of up to $10 million. Sectors of interest include manufacturing, industrial, and business services with a specific Interest in niche manufacturing, industrial services, waste management, value-added distribution, aerospace and defense, and printing and packaging.

Private Equity Professional | August 28, 2020

Advent Adds Another Brand to Sovos

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Sovos Brands, a portfolio company of Advent International, has agreed to acquire Birch Benders, a maker of pancake and waffle mixes, toaster waffles, and pancake and baking cups.

Birch Benders’ products include organic, plant-based, non-GMO, protein, paleo, and keto alternatives. The company was founded in 2011 by CEO Matt LaCasse and CMO Lizzi Ackerman and is headquartered in Denver, Colorado.

“We are absolutely thrilled to be joining the Sovos family,” said Mr. LaCasse. “We believe the wealth of experience and resources of the team at Sovos will allow us to reach even more consumers with our delicious, innovative, easy-to-make offerings made with nutrient-rich, quality ingredients.”

Advent formed Sovos (Latin for unique or one-of-a-kind) in January 2017 to acquire Michael Angelo’s Gourmet Foods, an Austin-based producer of frozen Italian entrées with approximately $100 million in annual sales. Advent’s investment strategy with Sovos is to acquire and build one-of-a-kind and high-quality brands in on-trend categories to build a company of scale in the consumer packaged goods industry.

In July 2017, Sovos closed the buy of its second add-on acquisition, Rao’s Specialty Foods, a New York City-based maker of pasta sauce; and in October 2018 Advent merged Noosa Yoghurt, a Bellvue, Colorado-based maker of yogurt that it had acquired in November 2014, into Sovos.

When the Birch Benders acquisition closes, expected during October 2020, Sovos will have products in seven food categories – sauces, yogurt, frozen entrées, pancake & waffle mixes, frozen waffles, soups and dry pasta – and annual retail sales of more than $750 million.

Berkeley, California-based Sovos is led by Todd Lachman, President and CEO; Larry Bodner, CFO; and Bill Johnson, Chairman. Mr. Lachman has a 25-year record as a senior executive at major consumer products companies, including Mars, Del Monte Foods, H.J. Heinz, and Procter & Gamble. Mr. Bodner has over 25 years of experience as an operationally focused financial executive at companies including Big Heart Pet Brands, Del Monte Foods, Walt Disney, and Procter & Gamble. Mr. Johnson was formerly Chairman, CEO and President of H.J. Heinz. He had a 31-year career at Heinz, where he grew top- and bottom-line results across multiple segments to transform the company into a global food industry leader.

“With its absolutely delicious products that deliver against healthy consumer lifestyles such as paleo and keto diets, Birch Benders is the perfect next addition to our growing portfolio of one-of-a-kind brands. Birch Benders shares Sovos’ commitment to making simple and delicious foods that use only the highest quality ingredients,” said Mr. Lachman. “With our proven ability to transform brands by unleashing growth and deepening consumer affinity, we are thrilled to take Birch Benders to a new chapter of growth while diversifying Sovos into new categories.”

Advent International invests in companies active in business and financial services; healthcare; industrial; retail, consumer, and leisure; and technology, media and telecom. The firm has 15 offices in 12 countries and employs 195 investment professionals across North America, Europe, Latin America, and Asia. Founded in 1984 and headquartered in Boston, Advent has $57 billion in assets under management and has completed more than 350 private equity transactions.

Private Equity Professional | August 27, 2020

Gen Cap Buys Eastern Business Forms

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Gen Cap America has acquired Eastern Business Forms in partnership with the company’s management team.

Eastern Business Forms (EBF) is a specialty manufacturer of 903 filter paper, 903 diagnostic devices and procedure packs. EBF’s products are uses by healthcare professionals in the collection and in-vitro storage of blood and urine samples to test and screen newborns for a range of disorders and abnormalities.

903 papers must be manufactured to meet strict industry standards set by the Clinical Laboratory Standards Institute and must have high levels of purity, consistency, and absorption characteristics. In 1998, 903 sample collection paper became the international standard for body fluid sample collection, transport, analysis, and archiving.

EBF was founded in 1964 and is headquartered near Greenville in Mauldin, South Carolina.

“We are excited to support the team at EBF as they continue their long legacy of quality and reliability in the 903 diagnostics space,” said Mark Isaacs, a managing director at Gen Cap. “EBF for decades has been an industry leader, and we are thrilled to be partners with them as they move into the next phase of growth.”

With the closing of this transaction, the EBF management team is now led by newly appointed President and CEO, Brad Nelson (he has been with EBF since 2008), and Executive Vice President and Chief Marketing Officer, Will Adams.

“This was exactly the partnership we had hoped to find as we looked to transition into the next generation of management here at EBF,” said Mr. Nelson. “We’re thrilled to have brought Gen Cap on board and look forward to building on our long track record of success with the team here at EBF.”

Gen Cap America invests in companies with revenues between $10 million and $200 million and EBIT of $2 million to $15 million that are active in the manufacturing, distribution, or service sectors. Gen Cap was founded in 1988 and is based in Nashville.

“EBF fits perfectly with Gen Cap’s investment model of backing management teams at companies with long histories of success,” said Barney Byrd, the CEO of Gen Cap.

The buy of EBF is Gen Cap’s twelfth platform acquisition for its fourth fund, Southwest Fund VII LP, which had a final close at its hard cap of $250 million in January 2017. Earlier this month, Gen Cap closed on the buy of TFM Services, a Wichita, Kansas-headquartered provider of janitorial and floor maintenance services to retail, commercial, health care, industrial, and education facilities.

Generational Equity was the financial advisor to EBF on this transaction.

Private Equity Professional | August 27, 2020

Grant Thornton Adds Supply Chain Pro

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Grant Thornton has hired Kirk Waldrop as a managing director in the firm’s operations transformation practice.

Prior to joining Grant Thornton, Mr. Waldrop was a vice president at Chainalytics, an Atlanta-based consulting, analytics, and market intelligence firm. Earlier, from 2002 to 2012 he led the space and homeland security supply chain and logistics business at Booz Allen Hamilton which advised NASA, Air Force Space Command, Air Force Space and Missile Systems Center, United States Coast Guard, and the Federal Emergency Management Agency.

In his new role at Grant Thornton, Mr. Waldrop will provide the firm’s private equity clients with supply chain services, including strategy and transformation; demand and supply planning; supply chain operations; sourcing and procurement; analytics; and transportation and network optimization.

“During this time of historic disruption and uncertainty, a strong supply chain management strategy is essential,” said Jonathan Eaton, national supply chain practice leader at Grant Thornton. “Kirk boasts decades of supply chain experience in industries ranging from private equity and retail to manufacturing and public sector — making him a vital source of supply chain management knowledge.”

Mr. Waldrop has an MBA degree in supply chain management and an MS degree in logistics and transportation from the University of Maryland. He earned his undergraduate degree in industrial engineering from the Georgia Institute of Technology.

“Kirk’s wealth of knowledge within the private equity supply chain sector is unparalleled,” added Carlos Ferreira, national managing partner for private equity at Grant Thornton. “Not only will he help our commercial and public sector clients define their supply chain strategy and navigate the challenging current environment, but he’ll also help grow Grant Thornton’s private equity offerings.” Mr. Ferreira was named as Grant Thornton’s national managing partner for private equity earlier this month, and he is also the firm’s global co-leader for transaction advisory services.

Founded in Chicago in 1924, Grant Thornton is the US member firm of Grant Thornton International, one of the world’s largest audit, tax and advisory firms. The firm has revenues in excess of $1.9 billion and operates more than 50 offices with more than 590 partners and 8,500 employees.

Private Equity Professional | August 27, 2020

Shyam Shah Joins O2

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O2 Investment Partners has hired Shyam Shah as the firm’s newest associate.

Mr. Shah will be responsible for evaluating new transactions, due diligence, underwriting, and working with O2’s portfolio companies.

Prior to joining O2, Mr. Shah was as an investment banking analyst at Duff & Phelps where he was active with the firm’s consumer and industrial clients on sell-side mergers and acquisitions.

“We are excited for Shyam to join the O2 team and given his relevant transaction experience, we envision his addition to be a great fit as we continue our strong portfolio growth and seek new opportunities,” said Luke Plumpton, a partner at O2.

Mr. Shah has his BBA degree in finance and accounting from the University of Michigan.

O2 makes control investments in companies with EBITDAs from $4 million to $15 million located anywhere in the US and Canada with a preference for companies based in the Midwest or the Great Lakes regions. Sectors of interest include B2B services, technology, niche industrial companies, services, distribution, and certain special situations.

Private Equity Professional | August 27, 2020

Behrman Building Cable and Harness Giant

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kSARIA, a portfolio company of Behrman Capital, has acquired Compulink Cable Assemblies.

Compulink is a designer, prototyper, and manufacturer of cable and harness assemblies used by original equipment manufacturers in military, medical, and transportation applications.

The company’s product capabilities include coaxial, radio frequency (RF), military standard, miniaturized connectors, and custom designs. Compulink, co-founded in 1984 by Rob Wilkin and Steve Shevlin, has more than 300 employees and operates at 40,000 sq. ft. facility in St. Petersburg, Florida.

kSARIA is a manufacturer of harsh environment fiber optic and electrical cable assemblies and harnesses used in military and aerospace applications. The company also offers cable assembly design, product testing, installation, training, and logistics management services.

The buy of Compulink is kSARIA’s second add-on since Behrman acquired the company in September 2018. The company’s first add-on was the September 2019 buy of Co-Operative Industries Aerospace & Defense (CIA&D), a Texas-based manufacturer of electrical wiring harnesses, ignition leads, and flexible metal conduits used in aerospace and defense applications. kSARIA, founded in 2000 and led by CEO Anthony Christopher, is headquartered 30 miles north of Boston in Methuen, Massachusetts.

“Acquiring Compulink further enhances our connectivity solutions offering, following our successful integration of CIA&D late last year,” said Mr. Christopher. “Compulink’s formidable presence in battlefield and ground-based applications, as well as other defense and commercial applications, complements kSARIA’s strength in aerospace and naval solutions. Together, we will have expanded production and engineering capabilities, as well as access to new end markets that enable exciting growth opportunities.”

“We are pleased that kSARIA is building on its recent success with its second acquisition since our investment in 2018,” said Grant Behrman, managing partner of Behrman Capital. “The company has continued to deliver strong performance and has rapidly expanded its platform in the high-reliability optical and connectivity sector. The acquisition of Compulink accelerates this momentum, and we look forward to continuing to support kSARIA as it implements its organic and acquisition growth strategy.”

Behrman Capital invests in management buyouts, leveraged buildups and recapitalizations of established growth businesses that are active in defense and aerospace, healthcare services, and specialty manufacturing and distribution. The firm has raised more than $3 billion since its founding in 1991 and is currently investing out of its sixth fund. Behrman Capital was founded by Grant and Daryl Behrman and has offices in New York and San Francisco.

Private Equity Professional | August 26, 2020

Imperial Advises GPI on Sale to CORE

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Imperial Capital was the financial advisor to GPI Prototype & Manufacturing Services on its just closed sale to FATHOM, a portfolio company of CORE Industrial Partners.

GPI uses direct metal laser sintering (DMLS) – a process that employs a high powered laser to melt and fuse metallic powders together – to print parts with complex geometries for on-demand manufacturing applications. The company has capabilities with a range of metal powders, including aluminum, steel and stainless steel, titanium, Inconel (a nickel-chromium-based alloy) and cobalt chrome.

Customers of GPI include numerous Fortune 500 companies operating in the medical, aerospace and defense sectors. The company, led by President Adam Galloway, was founded in 2007 and is headquartered north of Chicago in Lake Bluff, Illinois.

“The buy of GPI by FATHOM demonstrates Imperial Capital’s expertise across various industries and our Industrial Group’s knowledge and extensive relationships at all levels of the advanced manufacturing sector,” said John Mack III, a managing director and co-head of investment banking at Imperial Capital.

CORE has been actively assembling a 3D prototyping and low-volume production services platform since its buy of Midwest Composite Technologies (MCT) in September 2018.

MCT’s technical capabilities include laser sintering, poly-jet printing, stereolithography, fused deposition modeling, multi-jet fusion technologies, CNC machining, injection molding and industrial design. Customers of the company are active in the medical, aerospace, research & development, consumer, and industrial end markets. MCT was founded in 1984 and is headquartered 25 miles west of Milwaukee in Hartland, Wisconsin.

Companies like MCT are part of “Industry 4.0” which refers to the current trend of automation and data exchange in manufacturing technologies. The goal of Industry 4.0 is the creation of “smart factories” that utilize cyber-physical systems, the Internet of things, cloud computing and cognitive computing. Industry 4.0 is commonly referred to as the fourth industrial revolution.

In December 2019, MCT acquired ICOMold, an Ohio-based custom plastic injection molder and a provider of CNC machining to customers in the medical, consumer, industrial, electronics, and transportation sectors. A second add-on was closed by MCT in September 2019 with the buy of FATHOM, a California-based manufacturer with an expertise in 3D printing and additive manufacturing. FATHOM’s products are used in the consumer products, electronics, medical, automotive, aerospace, sporting goods, and product design sectors.

With the acquisition of GPI, CORE has decided that all four companies – MCT, ICOMold, FATHOM and GPI – will go to market under the FATHOM brand. The combined company now has 100 large-platform industrial-grade 3D printing machines and a national footprint with over 200,000 square feet of manufacturing capacity across five facilities.

“The addition of GPI to FATHOM is a strong addition that should greatly enhance and expand FATHOM’s leading capabilities,” said Kevin Frisch, the head of Imperial’s industrial group.

Imperial Capital provides middle-market companies and financial sponsors with investment banking advisory, capital markets and restructuring services. The firm employs over 250 professionals and has offices in Los Angeles, New York, London, Stamford, Florida, Houston, and Chicago.

CORE makes control investments in companies that have revenues of up to $200 million, EBITDA of up to $20 million, and enterprise values up to $150 million. Sectors of interest include a range of specialty verticals within the manufacturing and industrial technology sectors. In February 2019, the firm held a final close of CORE Industrial Partners Fund I LP with total commitments of $230 million. The new fund was significantly oversubscribed with demand in excess of the initial target of $200 million and initial hard cap of $225 million. CORE was founded in 2017 and is headquartered in Chicago.

Private Equity Professional | August 26, 2020

Gemspring Staffs Up

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Middle-market private equity firm Gemspring Capital has added to its investment team with the hirings of Michael Fan, Brad Liff, and Jack Tucker.

Mr. Fan joins Gemspring as a principal and he will be active sourcing and executing transactions in the software sector. He comes to Gemspring after three years at New York City-based Rubicon Technology Partners. Mr. Fan has also held private equity roles at York Capital and Bain Capital, primarily focusing on technology investments. Earlier in his career, Mr. Fan founded and led Car Safety Guru, a media business focused on car safety.

Mr. Liff will be focused on structured investments and opportunistic credit. He joins Gemspring as a managing director from Citigroup’s leveraged credit trading business. Earlier in his career, Mr. Liff was with H.I.G. Capital and its investment subsidiaries Bayside Capital and WhiteHorse Capital.

Mr. Tucker joins Gemspring as a managing director and chief operating officer, and he will be active with investor relations; environmental, social, and governance (ESG) initiatives; business development; human resources and recruiting. Mr. Tucker comes to Gemspring after five years at placement agent Acalyx Advisors where he was involved in several milestone fundraisings including Gemspring’s first and second funds. Prior to Acalyx, Mr. Tucker began his career at placement agent MVision.

In April 2020, Gemspring had a final closing of its second fund, Gemspring Capital Fund II LP, with $750 million of capital commitments. Each of Gemspring’s institutional investors from its first fund, which closed in November 2016 with $350 million of capital commitments, committed to the firm’s new fund.

“We are thrilled to welcome Michael, Brad and Jack to the Gemspring team,” said Bret Wiener, managing partner of Gemspring. “Michael is a successful software investor with an operational mindset who will help further expand our software practice. Brad enhances our credit expertise, helping us execute opportunistic investments across the capital structure. Jack brings a wealth of investor relations and project management experience to the team on a full-time basis.”

Westport, Connecticut-based Gemspring invests in companies that have revenues up to $500 million and are active in the business services, distribution and logistics, financial services, healthcare services, industrial services, software, tech-enabled services, and specialty manufacturing sectors.

Private Equity Professional | August 26, 2020

Align Targets Government Tech Sector

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Align Capital Partners (ACP) has acquired Electronic Transaction Consultants (ETC) from Atlantia SpA.

ETC is a provider of software and services used in electronic tolling technology, congestion management, and back-office support. Customers of the company include 3 of the top 15 toll authorities in the United States and the company’s products process more than 2 billion toll transactions per year.

ETC was founded in 1999 by Tim Gallagher and is headquartered north of Dallas in Richardson, Texas.

“We are looking forward to working with a growth-oriented partner who wants to further invest in our technology and innovative team to create a more robust mobility-as-a-service platform,” said Bret Kidd, the CEO of ETC. “As toll road miles are expected to grow significantly in the US over the next five years, ETC’s data capture and transaction processing technology is uniquely positioned to help state and local governments implement more efficient collection capabilities.”

Atlantia (Borsa Italiana: ATL), the seller of ETC, is an Italian holding company active in the infrastructure sector, including motorways, airport infrastructure and transport services. The company, founded in 1950, has annual revenues of more than €11 billion and is headquartered in Rome. Atlantia first invested in ETC in December 2007.

“ACP is proactively targeting the state and local government technology space, and ETC is an exciting growth opportunity in an attractive market,” said Rob Langley, a managing partner and a co-founder at Align. “The company serves some of the largest government tolling agencies in the US and is well-capitalized and positioned to leverage its technology suite for new projects.”

Working with Mr. Langley on this transaction were Operating Partner Dave Perotti, Vice President Matt Iodice and Associate Hannah Dickey.

Align Capital Partners makes control investments in companies with enterprise values up to $150 million that have from $3 million to $10 million of EBITDA. Sectors of interest include business-to-business services, specialty manufacturing, and value-added distribution. In January 2020, Align closed its second fund, Align Capital Partners Fund II LP and Align Capital Partners Fund II-A LP, at a combined hard cap of $450 million. The buy of ETC is ACP’s fourth platform and 12th overall investment in 2020.

Align, with offices in Cleveland and Dallas, was founded in 2016 by managing partners Steve Dyke, Rob Langley, and Chris Jones – all formerly of The Riverside Company – and has a total of 18 team members.

ETC was advised on this transaction by JD Merit & Company, an investment bank headquartered in Tacoma, Washington.

Private Equity Professional | August 25, 2020

Nautic Looks to Clean Up in Janitorial Services

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Nautic Partners has formed Helton Education Services (HES), a provider of outsourced maintenance services to the education sector, in partnership with industry executives Charlie Spencer and Buddy Helton.

Nautic has previously invested with these two executives through GCA, a national provider of janitorial and facility management services. From 2003 to 2012, under the leadership of Mr. Helton, GCA’s business grew from a start-up to more than $500 million in annual revenue.

In 2012, GCA was sold by Nautic to Blackstone, and in 2015 the company was sold to Thomas H. Lee Partners and Goldman Sachs. Then, in 2016, Messrs. Helton and Spencer founded Education Solutions Services (ESS), a provider of K-12 staffing services, which in 2017 merged with Nautic’s Source4Teachers, a provider of outsourced substitute teacher and services to K-12 schools. With the formation of HES, Mr. Helton will remain as the CEO of ESS, while Mr. Spencer moves from his position as executive vice president of ESS to president of HES.

“Nautic is fortunate to have known Buddy and Charlie for many years, and to have supported them at GCA, ESS, and now HES,” said Bernie Buonanno, a managing director of Nautic. “We believe our long-term and successful relationship is a testament to their talents and is an example of how we aspire to be the partner of choice for top management teams.”

In May, Knoxville, Tennessee-headquartered HES made its first acquisition with the buy of SMS, a provider of custodial services, facilities maintenance, and groundskeeping services to elementary schools, middle schools, high schools, universities, vocational, and trade schools in Tennessee, Georgia, and South Carolina.

“We are excited to have the support of Nautic as we seek to build HES into a strong national player. Our management team and customer relationships are strong today and we believe they will only improve over time through this partnership,” said Mr. Helton. “We are actively looking for companies to join our platform and we aspire to be the acquirer of choice for high performing family-owned companies in the education facility services industry.”

HES continues to seek additional regional maintenance services companies with a goal to assemble a national company to provide custodial and maintenance services to K-12 and higher education customers across the United States.

“Particularly in light of the unprecedented budgetary and health challenges posed to schools by COVID-19, HES is proud to have the management depth and experience to offer the very highest levels of cleaning and facility maintenance services at a competitive cost,” said Mr. Spencer.

Nautic is a middle-market private equity firm that makes majority equity investments of $25 million to $250 million in companies that are active in the healthcare, industrial products, and outsourced services sectors. In March 2019, the Providence, Rhode Island-based firm held a final closing of Nautic Partners IX LP at its hard cap with $1.5 billion of limited partner commitments.

Private Equity Professional | August 25, 2020

The Deals Done – and Not Done

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GF Data’s just-released report for the second quarter of 2020 provides a clear view of the M&A marketplace in the months following the onset of Covid-19: Virtually no change in valuations, dramatically reduced volume and dramatically less debt usage.

The data tracking firm reported on transactions completed by 227 active private equity contributors in the quarter and meeting its parameters — Total Enterprise Value (TEV) of $10 million to $250 million and TEV/Trailing Twelve Months (TTM) Adjusted EBITDA of 3x to 15x.

“Valuations averaged 7.4x TTM Adjusted EBITDA in Q2,” said Andrew Greenberg, the CEO of GF Data. “This is unchanged from Q1. Yet there were only 31 completed deals in the GF Data universe, compared to about 80 in the prior quarter and the year-ago second quarter.  Even allowing for late reporting in the latest period, completed transaction activity was off from 50 to 60 percent.”

“The circumstances driving this downturn are of course unprecedented,” added Mr. Greenberg. “But one effect familiar from other down markets is the need to temper the data with a recognition of the deals that didn’t happen. It will take another two or three quarters for our overall view of the market to reflect other transactions that would have closed this spring had there not been this extraordinary public health event.”

While valuations did not move in the second quarter, there was an immediate retrenchment in leverage.  “Total debt averaged 3.3x TTM Adjusted EBITDA for the quarter,” said B. Graeme Frazier, IV, GF Data’s co-founder and principal. “This is a drop of more than half a turn from the range that prevailed from 2017 through the first quarter of this year.”

Static deal pricing combined with reduced debt utilization translated into a spike in the average equity share required to get deals done, noted Mr. Frazier. “Average equity contribution for the quarter jumped about eight percentage points to 56.5%.”

“The vast majority of transactions closed in Q2 were likely already underway in one form or another prior to the pandemic taking hold,” said Dan Gaspar, a partner at TZP Group, a New York-based multi-strategy private equity firm. “We observed that most sale processes were halted in March and many did not reboot until June or July. The true impact of COVID-19 on the market will prove out over the remainder of the year.”

“We also observed that the leveraged lending markets experienced an immediate retrenchment in new deal issuances and leverage levels, combined with an increase in pricing that is likely to persist for some time,” added Mr. Gaspar. “Whether that reduction in debt availability will result in lower valuations or increased equity contributions will be case dependent.”

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 227 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.

Private Equity Professional | August 25, 2020

CORE Consolidates Industry 4.0 Platform

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Midwest Composite Technologies, a portfolio company of CORE Industrial Partners, has acquired GPI Prototype & Manufacturing Services.

CORE has been actively assembling a 3D prototyping and low-volume production services platform since its buy of Midwest Composite Technologies (MCT) in September 2018. These types of companies are part of “Industry 4.0” which refers to the current trend of automation and data exchange in manufacturing technologies. The goal of Industry 4.0 is the creation of “smart factories” that utilize cyber-physical systems, the Internet of things, cloud computing and cognitive computing. Industry 4.0 is commonly referred to as the fourth industrial revolution.

MCT’s technical capabilities include laser sintering, poly-jet printing, stereolithography, fused deposition modeling, multi-jet fusion technologies, CNC machining, injection molding and industrial design. Customers of the company are active in the medical, aerospace, research & development, consumer, and industrial end markets. MCT was founded in 1984 and is headquartered 25 miles west of Milwaukee in Hartland, Wisconsin.

In December 2019, MCT acquired ICOMold, an Ohio-based custom plastic injection molder and a provider of CNC machining to customers in the medical, consumer, industrial, electronics, and transportation sectors. A second add-on was closed by MCT in September 2019 with the buy of FATHOM, a California-based manufacturer with an expertise in 3D printing and additive manufacturing. FATHOM’s products are used in the consumer products, electronics, medical, automotive, aerospace, sporting goods, and product design sectors.

GPI, MCT’s latest add-on, uses direct metal laser sintering (DMLS) – a process that employs a high powered laser to melt and fuse metallic powders together – to print parts with complex geometries for on-demand manufacturing applications. The company has capabilities with a range of metal powders, including aluminum, steel and stainless steel, titanium, Inconel (a nickel-chromium-based alloy) and cobalt chrome.

Customers of GPI include numerous Fortune 500 companies operating in the medical, aerospace and defense sectors. The company, led by President Adam Galloway, was founded in 2007 and is headquartered north of Chicago in Lake Bluff, Illinois.

“GPI’s ability to leverage metal additive manufacturing accelerates both design cycles and time to market and further enhances FATHOM’s existing metal additive capabilities and our unique customer value proposition,” said Ryan Martin, chief executive officer of FATHOM. “We’re excited to work closely with GPI’s customers as a turnkey partner for on-demand manufacturing, providing a broad array of complementary services and an unparalleled customer experience.”

With MCT’s buy of GPI, CORE has decided that all four companies – MCT, ICOMold, FATHOM and GPI – will go to market under the FATHOM brand. The combined company now has 100 large-platform industrial-grade 3D printing machines and a national footprint with over 200,000 square feet of manufacturing capacity across five facilities.

“DMLS is one of the fastest-growing additive manufacturing technologies, both at FATHOM and broadly across the industry, and an important strategic focus as we seek to further strengthen FATHOM’s position as a leading on-demand manufacturer,” said Matthew Puglisi, a partner at CORE. “GPI is widely respected as one of the original metal additive manufacturing services providers, and we believe the combination with FATHOM will be highly synergistic.”

CORE makes control investments in companies that have revenues of up to $200 million, EBITDA of up to $20 million, and enterprise values up to $150 million. Sectors of interest include a range of specialty verticals within the manufacturing and industrial technology sectors. In February 2019, the firm held a final close of CORE Industrial Partners Fund I LP with total commitments of $230 million. The new fund was significantly oversubscribed with demand in excess of the initial target of $200 million and initial hard cap of $225 million. CORE was founded in 2017 and is headquartered in Chicago.

Monroe Capital provided financing for MCT’s buy of GPI. Monroe was founded in 2004 and is headquartered in Chicago with additional offices in Atlanta, Boston, Los Angeles, New York, and San Francisco.

Private Equity Professional | August 21, 2020

Arcline Acquires Another Elevator Services Company

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Arcline Investment Management has acquired Jersey Elevator, a New Jersey-based provider of elevator maintenance services.

Jersey Elevator’s services include elevator maintenance, modernization, and installation to customers in New Jersey and Pennsylvania. The company was founded in 1974 and is headquartered south of New York City in Aberdeen, New Jersey.

“Jersey Elevator has a strong management team and a dedicated workforce that is highly regarded for its quality of service,” said Arcline in a released statement. “We are excited to partner with the company to support its future expansion through complementary investments in technology and acquisitions.”

“Forty-six years after my father founded the company, this move provides us with a strong foundation for the continued development of the business,” said John Sweeney, the president of Jersey Elevator. “I am excited to be working with Arcline to create lasting growth within our industry.”

The buy of Jersey is Arcline’s second investment in the elevator maintenance services sector in 2020. Back in May, the firm acquired Unitec Elevator from Pacific Avenue Capital Partners. Unitec’s service area includes New York City, New Jersey, and Long Island.

Arcline makes control investments in companies that have from $10 million to $100 million of EBITDA and enterprise values of up to $1 billion. Sectors of interest include industrial technology, life sciences, aerospace and defense, personal care, medical products, and specialty chemicals. The firm closed its first fund, Arcline Capital Partners LP, with $1.5 billion of committed capital in March 2019. Arcline was founded in September 2018 and has offices in San Francisco and New York.

Private Equity Professional | August 21, 2020

TCF Backs Cathay’s IOP Add-On

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Innovative Office Products, a portfolio company of Cathay Capital Private Equity, has acquired SiS Ergo with backing from TCF Capital Funding. TCF provided just over $80 million of secured financing and was the sole lead arranger and administrative agent.

Innovative Office Products (IOP) is a designer and manufacturer of ergonomic products including monitor, tablet, sit-stand mounting systems, and height-adjustable desks that are used in office, healthcare, and other specialty workspaces.

IOP was acquired by Cathay in January 2018. In June 2018, IOP acquired San Jose, California-based HAT Contract, a designer, contract manufacturer and distributor of open space office products including height-adjustable tables, power and data beams, drawer pedestals, dividers and electrical components for benching and bases.

The buy of SiS Ergo adds a new brand to IOP’s other company-owned brands including Innovative, HAT Contract, Ergotech, and CompuCaddy.

IOP, founded in 1986, and has over 200 employees working in the US with a headquarters located 77 miles north of Philadelphia in Easton, Pennsylvania.

SiS Ergo is a manufacturer of electric and non-electric height-adjustable tables with Danish-inspired modern and minimalistic aesthetics. The company was founded in 1966 and introduced the first height adjustable desk in 1970. SiS Ergo is headquartered in Rudkøbing, Denmark and has an additional facility in Londonderry, New Hampshire.

“Innovative, HAT, and SiS Ergo have built strong brands by providing quality ergonomic solutions across many markets,” said Kevin Nowak, senior vice president at TCF Capital Funding. “We are excited to provide additional financing to support Cathay Capital’s and Innovative’s strategic plan through the acquisition of Sis Ergo. SiS Ergo’s customized product solutions enhances Innovative’s suite of product solutions and we believe this partnership will result in the company’s accelerated global expansion.”

TCF Capital Funding is a provider of cash flow-based loans to lower middle-market businesses that have from $10 million to $150 million in revenue and from $2 million and $15 million in EBITDA. TCF Capital Funding actively supports private equity sponsors and family offices in their acquisition or recapitalization of these lower middle-market companies.

In addition to Cathay Capital, the shareholders of IOP include members of its senior management team, Norwest Mezzanine Partners, and ORIX Private Equity.

Cathay Capital was founded in 2007 and has completed over 140 buyouts, growth and venture capital investments and manages more than $3.8 billion of assets. The firm invests from $25 million to $75 million in control and minority positions. Sectors of interest include consumer products and services, business and digital services, healthcare, and advanced manufacturing sectors.

In May 2020, Cathay Capital closed its latest fund, Cathay Capital Midcap II LP, with $850 million of capital. Midcap II is the firm’s largest fund to date and an increase of $325 million over its Midcap I fund, which closed in 2014.

Cathay Capital has more than 100 employees with offices in Paris, Shanghai, Beijing, New York, San Francisco, Munich, Tel Aviv, and Singapore.

Private Equity Professional | August 21, 2020

Arlington Sells Centauri at Big Multiple

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Arlington Capital Partners has agreed to sell Centauri to publicly traded KBR for $827 million in cash.

Centauri is a provider of engineering, intelligence, cybersecurity and advanced technology to intelligence and national defense agencies for applications on land, air, sea, space, and cyberspace. The company specializes in outer space and directed energy applications.

Centauri was formed by ACP in April 2019 to consolidate its national security investments in Integrity Applications (acquired in February 2018), Dependable Global Solutions (acquired in July 2018), and Xebec Global (acquired in October 2017).

Centauri, led by CEO David Dzaran and headquartered in Chantilly, Virginia, has just more than 1,750 employees and 22 offices across in Virginia, California, Hawaii, Ohio, Michigan, Pennsylvania, Massachusetts, and Maryland.

“Arlington’s bold vision for Centauri’s future is what led us to partner with them, and it is fulfilling to have seen that strategy realized,” said Mr. Dzaran. “Our partnership with Arlington has produced outstanding growth for Centauri and we are equally as excited for the next chapter with KBR, where our combined capabilities will allow us to advance our solutions to the next level.”

KBR (formerly Kellogg Brown & Root) is an engineering, procurement, and construction company and a former subsidiary of Halliburton (it was spun out as a public company in 2006). The company provides professional services and technologies to the government, defense, space, aviation, energy, and specialty chemicals sectors. KBR has performed under numerous contracts with the US military during World War II, the Vietnam War, and the Iraq War. KBR, led by CEO Stuart Bradie, was founded in 1901 and is headquartered in Houston.

KBR has announced that it expects Centauri to have 2021 revenues of more than $700 million and EBITDA of more than $70 million. This yields an 11.8x proforma EBITDA valuation multiple.

“During our partnership, Centauri achieved dramatic growth and, through unique subject matter expertise along with aggressive investments in technology, solidified its role as a strategic asset to the national security community,” said David Wodlinger, a partner at Arlington Capital. “Centauri was purpose-built to solve the most complicated space and directed energy challenges faced by our country, a strategy that will only be enhanced by KBR’s scale, strong management team and shared focus on quality and culture.”

“Centauri’s world-renowned technical talent, specialized mission expertise and advanced R&D labs are a powerful combination that underlies its enduring market advantage,” said Ben Ramundo, a vice president at Arlington Capital. “With continued investment behind those strengths as a result of joining KBR, Centauri’s brightest days are still ahead.”

Arlington Capital was founded in 1999 and has completed over 90 acquisitions since its inception. Areas of interest include government-regulated industries and adjacent markets including aerospace & defense; government services; and technology, healthcare, and business services. Arlington Capital, based in Chevy Chase, Maryland, is currently investing out of Arlington Capital Partners V LP, a $1.7 billion fund that closed in June 2019.

Jefferies was the financial advisor to Centauri and Citizens Capital Markets advised KBR.

Private Equity Professional | August 20, 2020

Roark Looks to Clean Up in Facilities Services

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Roark Capital has made an investment in Divisions Maintenance Group, a technology and data-based provider of facilities maintenance services.

Divisions Maintenance Group (DMG) services retail chains, pharmacies, grocery stores, warehouses, distribution centers, and REITs across more than 46,000 locations in all 50 states. DMG’s network of independent service providers – totaling more than 5,700 – provide hundreds of services including building painting and repair, equipment assembly, electrical maintenance and repair, floor care, glass cleaning and repair, janitorial and sanitization, landscaping, elevator repair, security, and snow removal.

DMG, led by CEO Gary Mitchell and CSO Kyle Murray, was founded in 1999 and is headquartered near Cincinnati in Newport, Kentucky.

“We are delighted to partner with Roark,” said Mr. Mitchell. “The transaction process was seamless; the Roark team did exactly what they said they would do every step of the way, and their operational expertise, great culture, and deep need-based multi-unit services experience will help us further accelerate our growth.”

“DMG’s customer-first focus, leading technology platform, and dedication to its core principles drives unmatched quality and service delivery. We are thrilled to partner with Gary and Kyle,” said Mike Thompson, a managing director at Roark.

Roark Capital Group invests in companies that have revenues from $20 million to $5 billion and EBITDA from $10 million to $500 million. Sectors of interest include franchised and multi-unit business models in the retail, restaurant, and service sectors; consumer products; consumer and business services; and environmental services. Roark is headquartered in Atlanta with an additional office in New York City.

In November 2018, Roark completed fundraising for its two newest funds, Roark Capital Partners V LP and Roark Capital Partners II Sidecar LP, with a total of $6.5 billion of capital commitments.

The buy of DMG is Roark’s 42nd platform investment and its 12th business services platform investment since its founding in 2001.

Private Equity Professional | August 20, 2020