January 17, 2024
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Archives for January 17, 2024

Lineage Acquires Bellwether Media with Abacus Backing

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Abacus Finance Group was the Senior Secured Credit Facilities Administrative Agent and Sole Lender for senior secured credit facilities used to back the acquisition of Bellwether Media by Lineage Capital. In addition to its credit support, Abacus also made an equity co-investment in Bellwether.

Bellwether is a publisher of educational children’s books for students in pre-K through seventh grade under the Bellwether, Jump!, Bearport, and Kaleidoscope brands. The company has a portfolio of more than 7,500 nonfiction titles that address a variety of subjects and student segments, including early literacy, at-risk literacy, and STEM.

Source: Bellwether Media

Bellwether’s books are sold to the school library, classroom, and public library markets and are written to be engaging and literacy-promoting. As a result, its products are recognized by librarians and educators as among the best nonfiction titles for beginning and struggling readers. Bellwether’s titles are found in libraries across North America, Europe, Australia, South Africa, and Asia. The company was founded in 2005 by John Martin and is headquartered near Minneapolis in Minnetonka, Minnesota.

“As in past transactions, the Abacus team provided fast and efficient execution and was able to give us the certainty we needed to close in a short timeframe,” said Mark Sullivan, a managing partner at Lineage.

Boston-based Lineage Capital invests in US-based owner-managed or closely-held companies that have EBITDA of at least $4 million and have shareholders that are interested in retaining an ownership stake in the business in partnership with Lineage.

“We are happy to support Bellwether Media, a company that has been performing extremely well,” said Tim Clifford, the president and CEO of Abacus. “As in other transactions, our success was a function of our speed, cash-flow flexibility, and certainty of close – key aspects of what we call our Total Partnership Approach™.”

Abacus provides cash flow-based senior financing to private equity and family office-sponsored, lower-middle market companies that have EBITDA between $3 million and $15 million. Debt facilities can be as large as $50 million. Since Abacus’s founding in June 2011, it has closed over $3 billion in financings. Abacus, led by Mr. Clifford, is headquartered in New York City and is an affiliate of New York Private Bank & Trust which was founded in 1850.

“Lineage is always excellent to work with and is a great partner for management teams,” added Abacus Managing Director Eric Petersen. In addition to Mr. Petersen, the Abacus transaction team included Senior Vice President Rafal Rydzewski, and Associate Greg Scanlon.

Source: Bellwether Media

Madeira Partners was the investment banking advisor to Bellwether on this transaction.

© 2024 Private Equity Professional | January 18, 2024

CORE’s Newest Platform Flies High

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CORE Industrial Partners has acquired Aviation Concepts, a provider of aerospace components.

Aviation Concepts is a distributor of nose-to-tail used serviceable material (USM) aircraft parts and components for a variety of aircraft fleets. USM parts are previously used aircraft parts – engines, avionics, and more – that have been inspected, tested, and certified for reuse. These parts must meet strict safety standards set by aviation authorities including the FAA.

Aviation Concepts’ USM products include avionics and instruments, rotable components, actuation systems, hydraulics, landing gear and brake systems, engine accessories, flight control surfaces, and auxiliary power units that are sold to more than 500 customers including commercial and freight airlines, maintenance, repair and overhaul organizations and other aerospace components distributors.

Source: Getty Images

The company provides replacement parts and inventory management services for Airbus and Boeing commercial aircraft as well as Canadair Regional Jets, Embraer Regional Jets and other regional aircraft fleet types. Aviation Concepts’ inventory consists of more than 50,000 line items valued at over $40 million. Aviation Concepts was founded in 1991 by President Dean Wood and is headquartered near Fort Lauderdale in Sunrise, Florida.

“With more than 30-years of experience, Aviation Concepts and its management team have developed and maintained a partnership-focused approach within the commercial aviation space,” said John May, the managing partner of CORE. “The commercial aviation parts and MRO sector has been a key investment thesis for CORE, and now is the time for us to execute on our vision by making a platform investment in Aviation Concepts, which we believe has a differentiated model supported by strong industry tailwinds.”

Post-closing, Bob Nardelli, a senior operating partner at CORE, will become the chairman of the Aviation Concepts’ board of directors.

“For more than 30 years, we have focused on providing customers with reliable, high-quality parts in a timely fashion,” said Mr. Wood. “We believe our team has done a tremendous job building Aviation Concepts into a unique player in the commercial aviation industry and I look forward to partnering with CORE for the next chapter of growth for the business.”

“Aviation Concepts is a niche player in a highly attractive industry that has differentiated itself with its strong customer relationships and diverse suite of products,” said Jason Fulton, a partner at CORE. “We are excited to partner with Dean and the entire Aviation Concepts team as we leverage our industry knowledge, resources and experience to help expedite the Company’s next stage of growth, expanding its value proposition and market reach through both strategic initiatives and complementary acquisitions.”

Chicago-based CORE makes control equity investments of up to $100 million in North America-based companies with revenues of up to $200 million and EBITDA of up to $20 million. Sectors of interest include a range of specialty verticals within the manufacturing and industrial technology sectors.

© 2024 Private Equity Professional | January 18, 2024

Grant Thornton Sees Big Capital Need in Tech Sector

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Grant Thornton’s new Tech CFO Survey reveals how chief financial officers at technology companies plan to achieve growth in the coming years despite fierce competition and other challenges.

The Tech CFO survey, which polled 150 senior finance executives in the technology industry, also gauged sentiment on major topics like artificial intelligence (AI), cybersecurity and the technology workforce.

One of the survey’s key findings was the clear need for more capital. In fact, 91% of survey respondents said they will need to raise capital in the next two years, while nearly two-thirds (65%) said they needed to raise capital within the next 12 months. These capital raises are necessary to meet rising costs. For instance, 71% of technology CFOs said they expect IT/digital transformation expenses to rise in the next 12 months, while 61% said the same for their cybersecurity and risk management efforts.

According to the survey, private equity may be called upon to fill this capital need as more than 90% of survey respondents said they are seeking private equity investment.

The technology industry isn’t alone in its preparations for higher costs. Grant Thornton’s third quarter CFO survey, which covered multiple industries, revealed that 58% of CFOs expect to increase their spending on IT/digital transformation. That figure was the highest percentage in its category since the first quarter of 2021.

These cost expectations align with what technology CFOs describe as their biggest challenges over the next six months. Specifically, 56% of technology CFOs said their greatest challenge will be technology upgrades, while 51% said their greatest challenge will be cybersecurity.

“When I take a step back, what technology companies are trying to do is control costs and measure growth,” said Andrea Schulz, Grant Thornton’s national managing partner for technology. “A lot of what I’m hearing in the market is about increasing the margin on existing product and service offerings, getting net income up to either breakeven or beyond and making sure that companies are showing profitability and growth.”

According to the survey, private equity may be called upon to fill this capital need as more than 90% of survey respondents said they are seeking private equity investment.

When asked what moves they will make to enable growth in the next one to three years, more than one-third (35%) said they plan to merge or acquire other companies. But, according to the survey data, several strategies will be more popular than mergers and acquisitions.

The survey also revealed a clear focus on culture with 45% of respondents saying that improving their organization’s culture will be a key priority over the next 12 months.

Fifty-nine percent of technology CFOs said they plan to launch new products or services. What’s more, 57% said they plan to expand into new markets or geographies, while 52% said they are striving to increase market share or their customer base.

“All three of those strategies are very capital-intensive,” said Ms. Schulz. “And each one has very different risks. You’re basically starting from scratch if you’re launching a brand-new product or service — it’s a high risk at that point. If that’s your growth structure, you might need to step back and understand whether you have the customer base. It’s potentially a startup phase product line. It might not manifest the growth that you were envisioning in year one to three.”

When asked how they expect the economy to impact their workforce in the next six months, nearly two-thirds (65%) of survey respondents said a slower economy will lead to high retention rates. However, half (50%) of respondents said they expect continued difficulties in attracting and retaining the right talent, and nearly one-third (31%) said the state of the economy could lead to layoffs.

Still, survey respondents are clearly making moves to keep their people. Over half (53%) of survey respondents said attracting and retaining key talent was their top workforce priority, and nearly half (47%) said they will prioritize employee work/life balance issues. The survey also revealed a clear focus on culture: 45% of respondents said maintaining or improving their organization’s culture will be a key priority over the next 12 months, while the same percentage said managing a hybrid workforce will be a major focus.

Many people are running too far ahead of where AI currently is in its practical deployment. They’re envisioning what it could be.”

According to Ms. Schulz, a “salary reset” is in the works in the technology industry. “Technology companies are searching for top talent at a reasonable price,” she said. “Revenue per head is now also a very popular metric to help rationalize labor costs and show that companies are not overinflated on the labor costs that they have.”

Investment in AI
Part of a technology CFO’s strategy is, of course, investing in the right technology. In terms of which technology these CFOs plan to invest in, there’s a clear frontrunner: artificial intelligence (AI).

In fact, 61% of survey respondents said their companies will invest in AI in 2024, and the same percentage of CFOs said they will use AI to enhance customer experiences and engagement. Meanwhile, 54% of technology CFOs said they will use AI to improve their decision-making and insights, while a similar number (51%) said they will use AI to automate routine tasks and processes.

Ms. Schulz noted that companies are wise to look to AI for ways to strengthen their business, but she cautioned that the immediate ROI some companies seek may be further away than they think. “There is an opportunity for companies to transform and look more streamlined, but that might be years out,” she concluded. “Many people are running too far ahead of where AI currently is in its practical deployment. They’re envisioning what it could be.”

To download a free copy of Grant Thornton’s Tech CFO survey click HERE.

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 of more than $2.4 billion and operates more than 50 offices with more than 600 partners and 9,000 employees.

© 2024 Private Equity Professional | January 18, 2024

Odyssey Promotes Three

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To begin 2024, Odyssey Investment Partners has promoted three members of its investment team.

Tug Fisher has been promoted to managing principal from principal. Mr. Fisher joined Odyssey in January 2011 from Deutsche Bank Securities where he was an analyst in the firm’s investment banking industrial group.

Mr. Fisher currently serves on the boards of Odyssey portfolio companies Barcodes, a Chicago-based provider of data capture, identification, and access control products (December 2018), Mercalis, a North Carolina-based provider of commercialization services to life sciences companies (November 2017); and ProPharma, a North Carolina-based research consulting organization to the biotech, medical device, and pharmaceutical sectors (October 2020).

The two other promotions announced by Odyssey include Judah Levy’s promotion to vice president from senior associate, and Spencer Marks’ promotion to senior associate from associate.

“We are delighted to announce the promotions of Tug, Judah, and Spencer, which acknowledge their impressive contributions to Odyssey’s success and the strategic growth of our portfolio companies,” said Brian Kwait, Odyssey’s chief executive officer. “Tug, who joined us as an associate thirteen years ago, has become an increasingly important member of the Odyssey team during his career with the firm, and we are pleased to recognize his contributions, leadership, and commitment to advancing Odyssey’s culture of teamwork and mentorship. Judah and Spencer are exceptional team members, and we look forward to each of their continued contributions in their new roles.”

Odyssey is actively engaged in the development of its professional staff demonstrated by the fact that seven of Odyssey’s nine managing principals on its investment team began their career at the firm as associates.

New York City-based Odyssey makes control investments of $100 million to $300 million in middle-market companies that have from $20 million to $100 million of EBITDA and are active in the industrial and business services sectors. In February 2020, Odyssey held a first, final, and hard cap closing of Odyssey Investment Partners Fund VI LP with $3.25 billion of capital.

© 2024 Private Equity Professional | January 18, 2024

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