Windjammer Exits AI at 24x

Windjammer Capital has agreed to sell Advanced Instruments to Patricia Industries, a subsidiary of industrial holding company Investor AB, at an enterprise value of $780 million. Windjammer acquired Advanced Instruments from its founding family in October 2016.

Advanced Instruments (AI) manufactures test and measurement instruments and related consumables that are used in scientific and analytical applications in the clinical health, biotechnology, and food and beverage industries. The company, led by CEO Byron Selman was founded in 1955 and is headquartered near Boston in Norwood, Massachusetts.

For the 12-month period ending June 30, 2020, AI’s sales totaled $72 million with an adjusted EBITDA of just over $32 million (a 45% EBITDA margin and a 24x adjusted EBITDA valuation multiple). According to Patricia Industries, while COVID-19 impacted both AI’s sales and profitability during the second quarter, the company has shown good resilience. Over the past 15 years, organic sales growth has averaged approximately 10 percent annually, with strong profitability.

“Our success in recruiting a world-class executive leadership team, setting the strategic direction and investing to support the execution of that strategy were all critical factors in driving significant value creation for our investors over the past four years,” said Craig Majernik, a managing director at Windjammer. “AI is a great example of where Windjammer can have success in the healthcare sector, in this case targeting the intersection of life science tools, diagnostics and biopharma enabling products and services.”

AI’s portfolio of products include freezing-point depression (FPD) osmometers (freezing-point depression is the decrease of the freezing point of a solution after the addition of another solution – e.g., salt in water, alcohol in water), jar systems for bacterial cultivation, automated cell counters, cryoscopes (used to measure freezing points), and pasteurization test systems.

According to AI, it is the world leader in using FPD technology for measuring the osmolality of solutions which is used in many biotech applications, including the rapidly growing fields of bioprocessing, cell, and gene therapies.

“Advanced Instruments fulfills many of the criteria we seek in new investments,” said Johan Forssell, the CEO of Patricia. “The company is the clear global leader in a highly attractive market segment with durable long-term growth prospects. Its products are critical for its customers yet represent a fraction of their overall costs. Advanced Instruments has a compelling financial profile with high growth and profitability, strong cash flow generation, and a large share of recurring revenue.”

Investor AB (NASDAQ: INVE B) is a Swedish investment firm controlled by the Wallenberg family which founded Stockholm’s Enskilda Bank in 1856. In 1916, Investor AB was created to manage and own the industrial holdings of the bank. Today, Investor AB is one of Northern Europe’s largest industrial holding companies. The company’s investments include ABB, AstraZeneca, Atlas Copco, Electrolux, Epiroc, Ericsson, Husqvarna, NASDAQ, Saab, private equity firm EQT, and Patricia Industries. Investor AB has more than 90 employees and offices in Stockholm, New York, and Palo Alto.

At closing, AI becomes Patricia’s fourth North American subsidiary, in addition to BraunAbility, an Indiana-based manufacturer of wheelchair accessible vans and wheelchair lifts, acquired in September 2015; Laborie, a Canadian-based maker of devices and consumables used to diagnose and treat pelvic floor and gastrointestinal disorders, acquired in August 2016; and Sarnova, an Ohio-based distributor of healthcare products and services to the emergency medical and acute care sectors. Patricia will fund the acquisition of AI with $620 million of equity and $160 million of new debt.

“Advanced Instruments has a market-leading technology and a track record of successful innovation. The company has a resilient business model, strong long-term organic growth potential and multiple ways to expand through acquisitions in both existing and new markets,” said Noah Walley, the co-head of Patricia. “We look forward to working with the management team and our strong industrial network to further develop the business.”

Windjammer invests equity and subordinated debt as a control investor in middle-market businesses located in the US or Canada that have EBITDA from $8 million to $50 million. Sectors of interest include niche manufacturing, business services and value-added distribution. The firm’s investment size ranges from $50 million to $200 million per transaction.  Windjammer was founded in 1990 and is based in Waltham, Massachusetts and Newport Beach, California.

Morgan Stanley was the financial advisor to Advanced Instruments on this transaction which is expected to close in the fourth quarter of 2020.

Private Equity Professional | September 30, 2020

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