Archives for 2020

L Squared Exits Learners Edge

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L Squared Capital Partners has sold Learners Edge, an online provider of continuing education services, to Quad-C Management.

Learners Edge is a direct-to-teacher provider of online professional development, continuing education and master’s degree programs for K-12 teachers. Teachers use the company’s products to satisfy their teacher certification requirements or to move up their salary scale within their school district through additional education.

Learner’s Edge partners with academic institutions such as Augustana College, Aurora University, Colorado State University-Pueblo, Marygrove College, Pacific-Lutheran University and Lourdes University to provide degree-eligible credits to teachers. Learners Edge, led by CEO Jim Hall, was founded in 2002 by two middle-school teachers, Joe Cotter and Kyle Pederson, and is based just south of Minneapolis in Lakeville, Minnesota.

L Squared acquired Learners Edge in September 2016 from Stone Goff Partners. During its ownership term, L Squared completed two add-on acquisitions with the July 2018 buys of iteach, a Texas-based online provider of educator-focused test preparation programs; and Teaching Channel, a Minnesota-based online provider of professional development videos for K-12 teachers with more than one million registered users.

“L Squared has been a great partner for us,” said Mr. Hall. “Their valuable support and deep education experience helped us grow to serve more than 35,000 educators annually. L Squared was also instrumental in sourcing and completing two transformative acquisitions. We want to thank them for strategically positioning Learners Edge for the next phase of growth with our new partners.”

“We are incredibly proud of what we accomplished working with Jim and the management team at Learners Edge,” said Adam Kimura, a principal at L Squared. “This transaction is a testament to the tremendous impact the company has on teachers across the country and validates the hard work invested by the entire team to ensure teachers have the proper support to help students reach their educational potential.”

The sale of Learners Edge is the fourth exit for L Squared’s first fund which was raised in 2014. The other three exits were: Virtium, a California-based provider of industrial-grade solid-state memory storage products, which was acquired in July 2015 and sold in May 2019 to Court Square Capital Partners; Teaching Strategies, a Maryland-based provider of early childhood educational resources, including curriculum and web-based assessment products, which was acquired in October 2014 and sold to Summit Partners in May 2018; and Edlio, a California-based provider of community engagement services for K-12 public, private and charter schools, which was acquired in July 2016 and sold to LLR Partners in October 2018.

L Squared is headquartered in Newport Beach, California with an additional office in Chicago. In addition to Messrs. Healy and Farrero, the firm is managed by Sean Barrette, Randall Hunt and Adam Kimura, all of whom worked together at Chicago Growth Partners prior to founding L Squared in July 2014. In September 2020, L Squared closed its oversubscribed third fund, L Squared Capital Partners III LLC, with just over $500 million of capital.

Quad-C, the buyer of Learners Edge, invests from $35 million to $125 million of equity in companies with enterprise values of $75 million to $400 million. Sectors of interest include business services, consumer, general industrial, healthcare, specialty distribution and transportation and logistics. Quad-C was founded in 1989 and is headquartered in Charlottesville, Virginia.

Baird was the financial advisor to L Squared and the Vedder Price provided legal services.

© 2020 Private Equity Professional | December 11, 2020

Main Post Keeps Building Fortis

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Fortis Solutions Group, a portfolio company of Main Post Partners, has acquired Kala Packaging.

Kala Packaging is a printer of pressure-sensitive labels and flexible packaging, including pouches, to the food and beverage, health and beauty, and nutraceutical end-markets. The company’s capabilities include variable content printing, anti-counterfeiting and other security measures including micro text and invisible ink. Kala is headquartered near Provo in Orem, Utah.

Fortis Solutions, acquired by Main Post in December 2017, provides labeling and packaging – including pressure sensitive and shrink sleeve labels, multi-ply coupon and flexible packaging printing, extended booklet printing, folding cartons, label applicators and variable data printing – to companies active in the consumer-packaged goods sector.

Fortis now has fourteen manufacturing and sales offices across Texas, Oklahoma, Connecticut, Georgia, North Carolina, Missouri, Tennessee, Ohio, California, and Michigan. The company, led by CEO John Wynne, Jr., has more than 850 employees and is headquartered in Virginia Beach, Virginia.

“With its fleet of digital presses and top tier flexographic printing technology, CEO Maui Chai and the Kala team have established a national presence in the quick turn labels and flexible packaging markets,” said Mr. Wynne. “We are fortunate to join forces with such an outstanding team and are excited to further the value-added offerings we provide.”

Other recent add-on acquisitions for Fortis include ESOP-owned California-based Label Technology (June 2019), and Texas-based Infinite Packaging Group from Svoboda Capital Partners (January 2019).

San Francisco-based Main Post makes both control and non-control investments in consumer, business services and industrial companies with revenues of $25 million to $250 million and EBITDA of $5 million to $25 million. The firm was founded in April 2014 by managing partners Sean Honey and Jeffrey Mills, both former partners at private equity firm Weston Presidio.

© 2020 Private Equity Professional | December 11, 2020

Platinum Inks Deals for Ingram Micro

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Platinum Equity has agreed to acquire Ingram Micro, a distributor of information technology products, from HNA Group, in a transaction valued at $7.2 billion.

Ingram Micro’s products include desktop, laptop and mobile computer systems; audio and video devices; monitors and displays; data capture and point of sale devices; cybersecurity; cables; and a wide range of additional devices and accessories. The company has more than 2,000 vendors including Acer, Apple, Cisco, Citrix, HP, IBM, Lenovo, Microsoft, Samsung, and VMware.

Ingram Micro operates 190 distribution and logistics centers throughout North America, Europe, the Middle East, Africa, Latin America and Asia Pacific that serve more than 250,000 customers in just over 160 countries.

“We know Ingram Micro and the industry very well and have been investors in the technology and IT distribution and solutions sectors for more than a decade,” said Jacob Kotzubei, a partner at Platinum. “We have been pursuing this opportunity for a while and have been impressed by the company’s ability to thrive while continuing to navigate these fluid and challenging times. We will work closely with the Ingram Micro leadership team to sustain that momentum and build on the company’s success.”

Ingram Micro was founded in 1979 as Micro D, Inc. by husband and wife team, Geza Czige and Lorraine Mecca. The company was acquired by Ingram Industries in 1989 and went public as Ingram Micro in 1996. HNA Group, through Tianjin Tianhai Investment, acquired Ingram Micro in December 2016 for $6 billion. Today, Ingram Micro, led by CEO Alain Monié, has more than 35,000 employees and is headquartered in Irvine, California.

“Ingram Micro is an industry leader, one of the largest companies in the world and will be a cornerstone investment in our portfolio,” said Tom Gores, Platinum’s CEO. “We have the resources and the experience to help the company pursue an aggressive agenda of growth and transformation.”

For the trailing twelve months through September 2020, Ingram Micro’s revenues were $46 billion, with a gross profit of $3.5 billion (7.6% GPM), and EBITDA of $1.0 billion (2.3% EBITDA margin). With a purchase price of $7.2 billion, this yields a TTM EBITDA purchase price multiple of approximately 7.2x.

Platinum Equity invests in a range of industries including manufacturing, distribution, transportation and logistics, equipment rental, metals services, media and entertainment, technology, and telecommunications. The firm is currently investing from Platinum Equity Capital Partners V LP, a $10 billion buyout fund, and Platinum Equity Small Cap Fund LP, a $1.5 billion buyout fund focused on the lower middle market. The firm has completed more than 300 acquisitions since its founding in 1995 and is headquartered in Beverly Hills.

“Platinum’s sector expertise, global operating capabilities and financial resources make it the ideal partner,” said Mr. Monié. “Teaming with Platinum provides an opportunity to further strengthen our competitive advantage in the cloud, speed our digital transformation, and accelerate the expansion of our solutions and services portfolio. We will also be able to broaden our geographic reach even faster while penetrating new industries and verticals.”

Morgan Stanley and Goldman Sachs are the financial advisors to Platinum Equity on this transaction. Committed debt financing has been obtained by J.P. Morgan, Bank of America and Morgan Stanley Senior Funding. J.P. Morgan is the financial advisor to HNA Group.

This transaction is expected to close in the first half of 2021.

© 2020 Private Equity Professional | December 10, 2020

Aterian Adds Another Medical Components Maker

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Vander-Bend Manufacturing, a portfolio company of Aterian Investment Partners, has acquired Swiss Precision Machining (SPM).

SPM is a manufacturer of consumable instrument components that are used in robotic surgery and other high technology end markets.

The company’s capabilities and services include tight tolerance micro components, prototyping, engineering, and assembly. SPM was founded in 1979 by members of the Hauper family and it operates an 82,000 sq. ft. facility near Chicago in Wheeling, Illinois.

Vander-Bend is a prototyper, developer, manufacturer, and assembler of large-format metal products used primarily in the medical technology sector. With the buy of SPM, Vander-Bend now operates six facilities with more than 400,000 sq. ft. of manufacturing space across the West Coast and Midwest and employs more than 900 people. The company, led by CEO Greg Biggs, was founded in 1979 and is headquartered in San Jose, California.

SPM is the third medical technology add-on acquisition completed by Vander-Bend since being acquired by Aterian in May 2018. The two earlier buys were J.L. Haley Enterprises, a California-based fabricator of metal parts used primarily in medical device applications (January 2019); and TMK, a California-based provider of prototyping and precision machining services for small format medical components (May 2018).

“We are excited for Vander-Bend to complete this acquisition,” said Brandon Bethea, a co-founder and partner at Aterian. “Since making our investment in 2018, our objective has been to facilitate Vander-Bend’s transformation into a differentiated partner and supplier to industry-leading medical and other high technology customers. The combination with SPM is a key step along that strategic journey and creates a unique platform in the med-tech and datacenter infrastructure end markets.”

“This transaction exemplifies Aterian’s track record of investing in attractive family-founded businesses,” said Daniel Phan, a principal at Aterian. “We look forward to working with the combined company on its operational and growth initiatives, as well as continuing to pursue further strategic acquisitions.”

Aterian invests up to $50 million in small-to-middle market businesses with $25 million to $500 million in revenues that are underperforming, turnarounds or otherwise unique situations. Aterian held a final closing of Aterian Investment Partners III LP with $350 million of committed capital in July 2018. Aterian’s earlier fund closed in December 2013 with $257 million of capital commitments.

© 2020 Private Equity Professional | December 10, 2020

New State Buys Closeout Specialist KMS

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New State Capital Partners has acquired KMS, one of the nation’s largest wholesalers of consumer product closeouts.

KMS is a wholesale distributor of closeout, overstock, and factory refurbished merchandise, including clothing, hardware, housewares, and small appliances. KMS’ services allow brand name manufacturers to monetize overstocked products and other non-standard inventory without disrupting traditional sales channels.

Wichita-based KMS, founded in 1976, distributes its products through both leased and third-party operated distribution centers throughout the US.

Members of the KMS management team, including CEO Tom George, will remain with the company and have retained a minority equity interest in the business. “New State will be an invaluable partner as we seek to expand on what we do well,” said Mr. George. “We plan to leverage New State’s resources to help KMS build out our logistics, sales and purchasing teams and capabilities, and to invest in technology that will enhance our market-leading competitive position.”

“We are excited to announce our partnership with KMS,” said Kurt Lentz, a principal at New State. “Consumers are increasingly hunting for bargains within the off-price retail channel, and we see those habits firming and accelerating regardless of underlying economic factors. KMS can build on its broad array of longstanding relationships in product sourcing and wholesale channel delivery, and we also see great potential for growth within the company’s direct-to-consumer business.”

Backcast Partners provided senior secured debt and made an equity co-investment to support the buy of KMS by New State.

“KMS has a leading market position in a highly fragmented industry, is a valuable supply chain partner to both manufacturers and retailers, is generally focused on recession resilient products, and possesses a highly capable senior management team,” said Mark Gudis, a managing partner at Backcast. “We are thrilled to once again support New State, whom we view as an ideal owner for KMS due to their well-deserved reputation for building scale by aligning interests with their management partners, utilizing technology to create efficiencies and developing additional sales channels to drive growth.”

Backcast invests from $10 million to $100 million in companies with EBITDA of $10 million to $50 million that operate in a wide range of industries. Typical investments include senior and junior secured and unsecured debt, unitranche facilities, mezzanine debt, preferred equity, and common equity co-investments. Backcast has offices in New York City; Millburn, New Jersey; and Los Angeles, California and has a strategic relationship with Centre Partners which provides administrative and other resources.

New State invests from $10 million to $50 million of equity in companies with $8 million to $30 million of EBITDA that are active in the business services, healthcare services and industrial sectors. New State closed its second fund, New State Capital Partners II LP, in 2018 with $255 million in capital. The firm was founded in 2013 and is headquartered in Larchmont, New York.

© 2020 Private Equity Professional | December 10, 2020

Crossplane Hits Hard Cap on Inaugural Fund

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Crossplane Capital has held an oversubscribed, hard cap, and final closing of its inaugural fund, Crossplane Capital Fund LP, with $275 million of capital.

Institutional limited partners in Crossplane’s new fund include endowments, foundations, asset managers, family offices, and pension plans.

Crossplane invests control equity in companies that have up to $15 million of EBITDA that are either family-owned and seeking a partner or involved in a complex situation. Sectors of interest include niche manufacturing, value-added distribution and industrial business services companies.

“We are very appreciative of our top-notch and diverse investor base,” said Brian Hegi, a partner and co-founder of Crossplane. “Our highly respected early investors, seeded portfolio, hands-on and collaborative approach and experienced, cross-functional team led to significant investor interest above our $250 million target for our debut fund.”

Dallas-headquartered Crossplane was formed in October 2018 by Mr. Hegi and Partner Ben Eakes, Managing Director Mike Sullivan, and Operating Partner Ingrid West. Messrs. Hegi, Eakes and Sullivan are all former managing directors of Prophet Equity, and Ms. West is the former president of Acton Mobile, a Baltimore-based provider of modular space and portable storage products. Acton Mobile was acquired by Prophet Equity in 2014 and sold to publicly traded Williams Scotsman (NASDAQ: WSC) for $235 million in cash in 2017.

Since its founding, Crossplane has completed three platform acquisitions, including The Accent Family of Companies, a Texas-based value-added industrial distributor of nails, screws, baling wire, and wire ties (acquired in September 2019); TransAxle, a New Jersey-based remanufacturer of medium and heavy-duty truck transmissions, differentials, and hydraulic pumps (acquired in December 2019); and Griffin Dewatering, a Texas-based provider of groundwater control services to infrastructure, industrial, power and commercial construction projects (acquired in November 2020).

“We are excited to have the final closing of our inaugural fund so that we can focus 100% of our attention on acquiring strategically unique industrial companies and working alongside our management teams to create transformational performance improvement,” said Mr. Hegi. “We look forward to a long partnership with our investors.”

“We believe our proven team of experienced operations and investment professionals is uniquely positioned for our strategy of partnering with strategically relevant, industrial-focused, lower middle-market companies,” said Mr. Eakes. “We appreciate the confidence that our investor base has placed in our team, and we look forward to many years of shared success.”

In tandem with the closing of the new fund, Crossplane has hired Greg Balliro as a principal and Patrick Lynch as an associate. Mr. Balliro was previously with Prophet Equity and Mr. Lynch was with Atlanta-based investment bank, Bowstring Advisors. From its initial four-person team in 2018, Crossplane now has twelve investment professionals, advisory, and administrative staff.

“Having worked with Greg since 2014, we are excited to add his horsepower to our team. He brings a unique background in closing complex transactions and working hand-in-hand with portfolio companies to improve performance,” said Mr. Sullivan. “The addition of Patrick comes at the perfect time as we execute on a strong pipeline of transaction opportunities.”

Eaton Partners was the placement agent for this fundraise and its team was led by managing directors Eric Deyle and David Welp. “With over 70% of the capital raised after the COVID-19 shutdown hit the US in March of 2020, we are both humbled and grateful for the support of our strong investor base and partnership with Eaton,” added Mr. Hegi. “Eaton’s cycle-tested experience and responsiveness to changing and difficult market conditions proved to make the difference during our inaugural fundraise.”

“When the shutdown hit, Eaton immediately changed lanes and shifted gears to help power us home,” concluded Mr. Eakes. “Eaton acted as owners, with a passion and conviction to overcome the fundraising hurdles created by this pandemic.”

Rowayton, Connecticut-headquartered Eaton Partners has helped investment managers raise more than $140 billion across more than 140 alternative investment funds and offerings since its founding in 1983. The firm is a market leader in raising first-time funds, having successfully closed 44 first-time funds with $27 billion in total capital commitments. Eaton Partners is a subsidiary of Stifel Financial (NYSE: SF) and has offices throughout North America, Europe and Asia.

© 2020 Private Equity Professional | December 10, 2020