Bernhard Capital has agreed to acquire the Federal & Defense (FDS) business of publicly traded VSE Corporation for up to $100 million, through $50 million in cash at closing and up to $50 million through an earnout.
VSE (NASDAQ: VSEC) is a provider of aftermarket distribution and repair services for land, sea and air transportation equipment used in the commercial, federal, military and defense sectors. Specific capabilities of VSE include MRO services, parts distribution, supply chain management and logistics, engineering support, consulting and training services. VSE is led by CEO John Cuomo and is headquartered in Alexandria, Virginia.
VSE’s Federal & Defense business (FDS) core capabilities include naval asset program management, aircraft maintenance and modernization, land-based platform maintenance and modernization, logistics and distribution, data management and energy consulting services. Customers of FDS include a range of government clients, and US and allied nation military agencies around the world.
In FY2022, FDS had revenues of $280 million and an adjusted EBITDA of $10.8 million. For the trailing four quarters ending March 2023, FDS revenues were $276 million with an adjusted EBITDA of $7.6 million. Excluding the $50 million earnout portion of the $100 million purchase price, this results in a T4Q valuation multiple of nearly 6.6x.
“As a full-service provider across land, sea, air, energy, and technological assets, the VSE FDS business stands out as a highly specialized and deeply experienced partner supporting some of the country’s – and the world’s – most critical government and military assets,” said Jeff Koonce, a partner at Bernhard Capital.
VSE’s decision to sell FDS is the result of a strategic review undertaken by the company’s senior management team and board of directors. “We are pleased to have found our Federal & Defense business a new home with Bernhard Capital, a high-quality, private equity sponsor that will enhance the business strategy and build on a 63-year rich history of government and defense mission-critical support,” said Mr. Cuomo. “The sale of FDS represents a significant milestone in VSE’s transformation to a premier aftermarket product and services company.”
The acquisition of FDS establishes a new government services platform for Bernhard which will seek to acquire additional service providers to the US government with a particular focus on the Department of Defense, the Department of State, and the United States Intelligence Community.
Earlier this week, Bernard’s new government services platform agreed to acquire Duotech Services, a North Carolina-based provider of repair and maintenance services to military and civilian agencies, as well as aerospace and commercial users of electronic and electromechanical equipment with a specialty in radar systems, avionics, and communications equipment. Specific company capabilities include engineering, reverse engineering, repair and re-manufacturing.
Bernhard has experience building national platforms across numerous services- and infrastructure-related categories. For instance, in November 2020 Bernhard acquired Allied Power from publicly traded Charah Solutions (NYSE: CHRA) for $40 million in cash. Louisiana-headquartered Allied Power provides a range of repair and maintenance services to utility companies. Specific services include routine maintenance, project management, valve repair, reactor and turbine maintenance, specialty welding and facility maintenance.
In July 2022, Bernhard Capital closed an add-on acquisition for Allied with the buy of Radiation Safety & Control Services, a New Hampshire-based provider of project management, technical, and laboratory services to the nuclear power industry, government agencies, and other companies that use radioactive material. The company specializes in nuclear and radiological operations and decommissioning projects and also provides radiation monitoring products and laboratory services.
“In building a differentiated government services platform, we are focused on partnering with the highest quality businesses that have a track record of delivering essential services to critical priorities across government and defense initiatives,” said Thomas Henley, a managing director at Bernhard Capital. “The FDS business is well positioned in today’s market environment, with a history of providing critical solutions to our government and military for multiple decades. We look forward to utilizing both our expertise and capital to drive long-term growth as part of our newly established, differentiated, and scaled platform.”
Bernhard Capital is a services and infrastructure-focused private equity firm established in 2013 by Jim Bernhard and Jeff Jenkins. The firm has deployed capital through four funds and has approximately $3.0 billion of assets under management. Bernhard Capital is headquartered in Baton Rouge, Louisiana.
William Blair is the financial advisor to Bernhard Capital on this transaction.
The sale of FDS to Bernhard is expected to close in late 2023 or early 2024.
© 2023 Private Equity Professional | May 11, 2023
American Track Services, a portfolio company of DFW Capital Partners, has acquired Universal Rail Systems from TorQuest Partners. With the acquisition of Universal Rail, American Track has announced a rebranding of the combined businesses to North American Rail Solutions.
“Less than 18 months after our original investment in American Track, we have become the leading North American provider of rail inspection, maintenance, repair, and niche construction services to industrial customers,” said Keith Pennell, the managing partner of DFW. “With the addition of Universal Rail, we will not only broaden our footprint into Canada but build upon established relationships and proven capabilities in the Class 1 and transit segments – all while partnering with a first-class team of industry veterans.”
Publicly traded Baxter International has agreed to sell its biopharma solutions business to Advent International and Warburg Pincus for $4.25 billion in cash.
“BPS is a premier asset at the forefront of the biopharma industry, and one we’ve been closely following for a number of years,” said John Maldonado, a managing partner at Advent. “Leveraging our deep sector expertise and significant strategic resources, we believe this partnership can unlock multiple opportunities for growth and help the business realize its full potential by serving blue-chip customers, including Baxter, with high-value, specialized and end-to-end capabilities as a standalone company.”
“BPS’s success and exceptional market reputation within the pharmaceutical sector position the company well to continue to grow its mission-critical services across a variety of therapeutic areas including oncology, metabolic disease, and infectious disease, among others,” said TJ Carella, a managing director and head of healthcare at Warburg Pincus. “We are excited to partner with Advent and the impressive team at BPS who have developed differentiated technical capabilities and established an industry-leading reputation for quality and reliability in the supply chain for parenteral drugs.”
Kinderhook Industries has sold Trilogy Home Healthcare to CenterWell Home Health, a subsidiary of publicly traded Humana.
“Over the course of Kinderhook’s ownership, the Trilogy team completed nine add-on acquisitions and expanded its footprint to eleven offices,” said Louis Aurelio, a managing director at Kinderhook. “These investments combined with a premier management team created the largest independent home health provider in Florida. CenterWell’s expansive footprint and commitment to growth will fit perfectly with Trilogy’s culture.”
“Kinderhook is thrilled with this outcome for Trilogy, its management team, and its employees,” said Chris Michalik, a managing director at Kinderhook. “This result highlights Kinderhook’s approach of partnering with exceptional management teams and providing them with the resources to achieve outsized growth. We would like to thank Dale Clift, Jamie Hynes and the entire Trilogy team for their unwavering dedication to their patients and mission over the last six years. We wish the team well under CenterWell’s ownership and are excited to see their future growth.”
Canlak Coatings, a portfolio company of SK Capital Partners, has acquired Ceram-Traz (DBA Ceramic Industrial Coatings).
“The addition of Ceramic Industrial Coatings to the Canlak platform significantly enhances the company’s leading position in the North American OEM wood coatings market,” said Jon Borell, a managing director of SK Capital. “The combined company will utilize a broader technology base in conjunction with an agile, solutions-oriented service model to support customers in our markets.”
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Hazeltree’s treasury and portfolio finance technology solutions serve hedge funds, asset managers, private equity funds, private debt, real estate funds, infrastructure funds, pensions and endowments, and their service providers. Hazeltree is headquartered in New York City, with offices in London and Hong Kong.
Corinthian Capital has invested in Ultimate Toys, a designer and marketer of Class B recreational vehicles.
“The opportunity to be the first institutional investor in Ultimate Toys, a rapidly growing, innovative business with a large addressable market, fits squarely within Corinthian’s target investment parameters”, said Kenneth Clay, the managing partner at Corinthian.
“We are excited to partner with Ultimate Toys and its strong management team to support the company through its next phase of growth,” said Charles Bayer, a vice president at Corinthian.
Accelevation, a portfolio company of LFM Capital, has acquired Workplace Modular Systems.
“LFM is excited about the complementary addition of Workplace to the Accelevation platform, which will broaden the product offering available to current and new customers,” said Chris Lin, a managing director at LFM. “We look forward to working closely with the Workplace team to scale the combined business.” Other members of the LFM transaction team included Executive Managing Director Steve Cook and LFM Senior Associate Ryan Richardson.
“This was our fourth transaction with LFM Capital, and once again we were able to meet their desire for a smooth execution in a short timeframe, just one of the many attributes of our Total Partnership Approach,” said Tim Clifford, the president and CEO of Abacus.
Shoreline Equity Partners has closed its sale of Florida Veg Investments (DBA Mr. Greens) to Sterling Investment Partners. The Mr. Greens management team will continue to lead the company and maintain a significant ownership position in partnership with Sterling.
“Nick and the entire team at Mr. Greens have done an incredible job navigating the most challenging times the industry has experienced and gained incredible market share as foodservice demand has rebounded,” said Mike Hand and Peter Franz, co-founders of Shoreline, in a released statement. “We are forever grateful to Nick and Peter Politis for selecting us as their first institutional partner. One of the greatest joys we experience at Shoreline is recognizing how well-positioned our businesses become ahead of their next cycle of ownership. That statement could not be more fitting than for Mr. Greens.”
Westport, Connecticut-based 
Pacific Avenue Capital Partners has held a final, oversubscribed, and hard cap close of its first fund, Pacific Avenue Fund I LP, with $500 million of capital commitments.
“We would like to thank our investors for their excitement in supporting the Pacific Avenue team. We are both honored and grateful for their support,” said Mr. Sznewajs. “The new fund will allow Pacific Avenue to continue our emphasis on corporate divestitures and other complex situations to create value for our stakeholders.”
Pacific Avenue’s new fund has already closed on one platform investment with the October 2022 buy of Sunrich Products, the sunflower and roasted snack division of publicly traded SunOpta (NASDAQ: STKL). Sunrich is an integrated provider of sunflower seeds and chickpeas used in the food ingredient, snack food, and birdseed markets.
