Archives for August 18, 2022

Rensa Filtration Switches Sponsors

by

Audax Private Equity has acquired Rensa Filtration, a maker of consumable air filtration products, from Edgewater Funds and Duchossois Capital Management.

Edgewater and Duchossois partnered with industry executive Brandon Ost in 2017 to form Air Filtration Holdings as a platform to acquire companies that manufacture air filtration products used in commercial and industrial systems. Now, in partnership with Audax, Rensa will continue its strategy to acquire filtration product suppliers. Mr. Ost and other members of the company’s senior management team will continue to lead the company and will maintain a significant equity ownership position.

Since 2017, Rensa has acquired Viskon-Aire, a Maryland-headquartered manufacturer of air and paint filtration products used in commercial and industrial HVAC and paint spray booth applications (July 2017); Permatron, an Illinois-based manufacturer of air filter components (September 2017); RoboVent, a Michigan-based maker of air filtration equipment and systems used in welding, cutting and metalworking applications (February 2018); D-Mark, a Michigan-based manufacturer of molecular filtration products (October 2018); Air Filters, Inc., a Texas-based full-line filtration products manufacturer (October 2018); and Custom Filter, an Illinois-based maker of HEPA and ULPA filters (August 2021).

Today, Rensa Filtration has facilities in Maryland, Illinois, Michigan, and Texas, and goes to market under six company-owned brands including Rensa, Custom Filter, Viskon-Aire, Permatron, D Mark, and Air Filters, Inc.

“Rensa is a distinguished leader in the air filtration manufacturing space, with a highly diversified product portfolio across key end markets,” said Andrew Oliver, a managing director at Audax Private Equity. “We look forward to supporting the company as it continues its impressive growth trajectory, providing mission-critical products to its valued customers.”

“Since our founding, Rensa has honored its commitment to engineering excellence, continuous improvement, and innovation—and Audax’s investment is a critical piece of our overall strategy as we continue to build a world-class filtration business,” said Mr. Ost. “We believe Rensa has never been better positioned for growth and look forward to benefiting from Audax’s proven expertise and value-add resources.”

“We’re thrilled to be partnering with Brandon and the talented team at Rensa to help drive growth, both organically and through strategic M&A,” said Joe Rogers, a managing director at Audax Private Equity. “With our investment, Rensa will be well-positioned to deepen relationships with key customers and channels, expand the company’s manufacturing footprint and capabilities, and increase exposure to rapidly growing markets.”

Audax invests in middle-market companies that have from $8 million to $50 million in EBITDA and enterprise values of $50 million to $400 million. Sectors of interest include business and consumer services; energy; healthcare; technology, media and telecom; and industrials including chemicals, infrastructure, and building materials. Audax, with offices in Boston, New York, and San Francisco, is currently investing out of its $3.5 billion, sixth private equity fund.

Lincoln International was the financial advisor to Audax and Baird was the financial advisor to Rensa.

© 2022 Private Equity Professional | August 18, 2022

Thompson Street Beats Fund VI Target, Adds Investment from Wafra

by

Thompson Street Capital Partners (TSCP) has closed its oversubscribed sixth investment fund, Thompson Street Capital Partners VI LP, with total commitments exceeding the $1.5 billion target.

Commitments to Fund VI came from both new and existing limited partners, including public, corporate and foreign pension funds, endowments, insurance companies, foundations, and family offices. Like its earlier funds, the partners of TSCP made substantial capital commitments to Fund VI. TSCP’s earlier fund, Thompson Street Capital Partners V LP, closed in July 2018 at its hard cap of $1.15 billion.

“Our focus when we launched the firm 22 years ago was to invest in exceptional companies and facilitate their strategic growth, and our track record illustrates we’ve done exactly that,” said Jim Cooper, the founder and a managing partner of TSCP. “The support for Fund VI from both existing and new investors has been excellent, demonstrating confidence in the strength of our team and the success of our investment approach.”

St. Louis-based TSCP makes equity investments of $50 million to $250 million in companies with EBITDA between $5 million and $50 million. Sectors of interest include healthcare and life science services, software and technology services, and business and consumer products and services.

“We are excited to continue to grow our firm, as we remain committed to our fundamental strategy of partnering with founders and management teams in our core industries of focus and then providing the right support and resources to help these already-exceptional businesses achieve accelerated growth – creating value for founders, management teams and our investors,” said Bob Dunn, a managing partner of TSCP.

TSCP has already invested twenty-five percent of Fund VI’s capital in four platforms including Silverchair, a Virginia-based provider of content management software to scientific, technical and medical publishers (August 2022); Benefit Recovery Group, a Tennessee-based provider of subrogation and compensation recovery services to self-insured companies (August 2022); PestCo, a Texas-based provider of residential and commercial pest control services (November 2021); and Vector Laboratories, a California-based manufacturer of visual detection reagents used by life science researchers for slide staining and imaging workflows (September 2021).

In tandem with the close of Fund VI, TSCP has also announced that Wafra has made a minority investment in the firm. “We are delighted to partner with Wafra, a firm whose like-minded approach to partnership will support this new chapter as we seek to maximize value for our investors,” added Mr. Cooper.

New York-based Wafra, led by CEO Fawaz Al-Mubaraki, has more than $33 billion of assets under management and invests across a range of asset classes including minority investments in private equity firms. Funds advised by Wafra have now made 24 minority investments.

“Driven by a talented team of investment professionals, Thompson Street deploys a differentiated investment approach that has provided strong and consistent returns to investors for over two decades. We are excited to partner with them on this next chapter,” said Lauren Rich, a managing director at Wafra.

For the raising of Fund VI, Park Hill Group was the placement agent and Kirkland & Ellis provided legal services. Advising TSCP on the investment from Wafra was Evercore with Kirkland & Ellis providing legal services.

© 2022 Private Equity Professional | August 18, 2022

Bright Lights, Big Wheels: Atlantic Street Expands All Star

by

Specialty distributor All Star Auto Lights, a portfolio company of Atlantic Street Capital, has acquired Blackburn OEM Wheel Solutions. Atlantic Street acquired All Star Auto Lights in September 2019.

Blackburn is a supplier of new and refurbished OEM steel and alloy wheels, center caps, and wheel covers to the automotive aftermarket. Customers of the company include body shops, wheel distributors, tire centers, wheel repair companies, automotive service facilities, auto dismantlers, rental car agencies, automotive dealerships, insurance companies, fleet management organizations, and the retail public.

Blackburn’s products include new and refurbished wheels, center caps, and wheel covers [Source: Blackburn]
The company was founded in 1978 by Jim Blackburn, Sr. as Blackburn’s Hubcap and Wheels and is now the largest privately held provider of original equipment replacement wheel products in the United States. Blackburn has a 150,000-square-foot warehouse and headquarters facility near Cleveland in Macedonia, Ohio.

All Star’s products include recycled and refurbished OEM parts and certified aftermarket products, including headlamps, tail lamps, park lamps, fog lamps, side view mirrors, wheels, wheel covers and center caps for both foreign and domestic vehicles. All Star’s customers include independent auto body shops and multi-site operators of collision repair centers. Orlando-headquartered All Star was founded in 2004 by Mark Immerfall and operates 13 facilities nationwide.

All Star’s products include recycled and refurbished OEM parts including headlamps, tail lamps, park lamps and fog lamps [Source: All Star Lights]
The acquisition of Blackburn is All Star’s third acquisition in the aftermarket OEM wheel sector and transforms All Star from just a traditional auto lights business into a general automotive aftermarket equipment supplier. In September 2021, All Star formed a wheels division as part of its acquisition of Tennessee-based Jante Wheel and Indiana-based Perfection Wheel.

“The buy of Blackburn significantly increases our capacity to manufacture and supply OEM wheels through our growing nationwide network,” said Matt Immerfall, the chief executive officer of All Star and the son of the company’s founder. “Combined with our existing family of brands acquired in 2021, Jante Wheel and Perfection Wheel, the addition of Blackburn quickly doubles our impact in the automotive wheels sector and offers our customers a more comprehensive selection and faster delivery while solidifying All Star’s wheel division to better serve its customer base.”

“It’s exciting for the All Star Team to round out our newly formed wheel division with Blackburn. Our ability to partner manufacturing and supply to take care of our customers on a national level is an incredible opportunity that we are thrilled about,” added Mr. Immerfall.

“We are excited to add Blackburn to All Star’s family of brands,” said Phil Druce, a partner at Atlantic Street Capital. “With 13 sites and over 400 employees, All Star is positioned as a national player with collision and body shops, tire and service centers, rental car, and auction house customers to profitably repair cars faster with the highest value OEM alternative replacement parts.”

Atlantic Street invests from $15 million to $75 million in companies with EBITDA from $4 million to $25 million. The firm invests across a range of sectors but has a specific interest in healthcare, multi-unit retail, business services, and consumer products and services. The firm closed its fourth fund, Atlantic Street Capital IV LP, with $500 million of committed capital in September 2019. Atlantic Street was founded in September 2006 by Peter Shabecoff and is based in Stamford, Connecticut with an additional office in West Palm Beach, Florida.

© 2022 Private Equity Professional | August 18, 2022

GF Data: Deal Pace Slows in Q2

by

Private equity buyers continued to tap the brakes in the second quarter, according to GF Data’s August report.

After a blistering pace in the latter half of 2021, completed transaction volume was down markedly in the first half of 2022, while valuations for mid-market companies acquired by private equity groups and other deal sponsors held strong at an average of 7.4x EBITDA.

GF Data’s 264 active private equity contributors reported on 55 transactions in the quarter that met its parameters — Total Enterprise Value (TEV) of $10 million to $250 million and TEV/Trailing Twelve Months (TTM) Adjusted EBITDA of 3x to 18x.

While volume is down, businesses with above-average financial characteristics continued to account for an increased portion of completed transaction activity, with these deals comprising 68 percent of the total compared to a historic norm of 57 percent.

Total debt averaged 4.0x in the second quarter, in line with the first quarter and 2021.

“We continue to hear anecdotal reports that non-bank lenders are reining in debt packages even on highly desirable properties,” said Andrew Greenberg, a GF Data founder. “If true, this development has not yet had an impact on aggregate debt multiples.”

According to GF Data, what is apparent in the numbers is a greater share of generously valued transactions being completed as leveraged recaps, rather than as change-of-control transactions. The average multiple for buyouts is generally quite close to the mark for the overall deal universe – not surprising in that this category invariably makes up about 85% of the total.

In the first six months of the year, though, the average multiple for buyouts was 7.2x, compared to 7.4x overall.

“This is unusual and suggests that more high-performers are choosing to take chips off the table rather than to substantially exit,” said Bob Dunn, a managing director with GF Data.

For larger transactions valued between $250 million and $500 million, GF Data found an average purchase price multiple of 8.9x EBITDA. This is well off the average of 12.0x last quarter – the average of the two periods is likely a better measure than either period individually. GF Data will continue to investigate this new deal size parameter in future reports, eventually incorporating a full analysis of this segment once it has collected enough data.

Finally, successive interest rate increases began to bite into leveraged transactions in the second quarter. Average interest on senior debt saw a marked increase in the second quarter for larger deals, jumping more than a percentage point in the $50 million to $100 million and $100 million to $250 million tiers, ending up at 5.3% and 5.7%, respectively.

“Investment headwinds continued in the second quarter from rising inflation and interest rates, geopolitical uncertainty, labor constraints and supply chain issues,” said Charles McCusker, a managing partner of Patriot Capital. “However, many of the Patriot portfolio CEOs are reporting an easing of input costs, better predictability of the supply chain, and more access to quality labor and as a result we expect M&A activity to rebound in the second half of the year.”

Founded in 2006, GF Data provides data on private equity-sponsored M&A transactions with enterprise values between $10 million and $500 million. The firm’s benchmark reports comprise proprietary transactional information provided by an established pool of private equity groups on a blind and confidential basis. GF Data’s subscribers utilize its accurate and up-to-date reports to value and assess middle-market businesses.

© 2022 Private Equity Professional | August 18, 2022